Google TV: Another step towards convergence

The installed base of television far exceeds that of personal computers, particularly true for the emerging markets. I have special interest in this field of convergence.  I tend to view a TV as a monitor without a CPU.  Google TV is in a way opening up the existing investments that households have made in the TV set and enabling them to use a neighbouring WI-FI connection to browse the Internet. 

I can see enormous potential, however, Google needs to set up

• A brand and product awareness exercise to make existing customers aware of the product, that is, going beyond Internet advertisements and using print and TV campaigns to reach the end customer.
• A customer service organization - This is a hardware offering - which needs customer support and education.  What if the WI-FI hot spot is at a distance from the TV, with walls and roofs in-between? Will a customer service person tune and configure the system? Who will provide support and service?
• Support for community sharing - Will this work in apartment complexes who set-up a shared WI-FI link?

An interesting initiative, which has all the potential to succeed and yet, too many execution risks at this stage.  Google will need all the program management and marketing skills they have to make it a success.  I wish them luck !!

Adobe Flash - Customer is King !!

Last few months have been not kind to Adobe.  Apple, the creator of MAC operating system, has openly challenged Adobe on Flash, calling it a legacy application, buggy, slow and consuming too much power.  Adobe makes majority of its revenue and profits by selling applications which work on MAC and Flash was one of the main reasons for Adobe to acquire Macromedia in 2005. 

As Web as gained prominence in the last decade and print has lost relevance, PDF is no longer the growth engine that drives Adobe business.  Web is the future and Flash is at the center of Adobe strategy for web. Without Flash, Adobe will struggle to grow its business and maintain its 40% operating margin. Adobe has spent last couple of years battling Microsoft's Silverlight and just when it seemed Adobe has managed to slowdown Microsoft's momentum with Silverlight, Apple has directly aimed at Flash, that too with a religious zeal.

Clearly, Adobe has been pushed to a corner. And its attempt to create some elbow room, by allowing developers to embed Flash Player inside application, has been circumvented by change in licensing policy by Apple.

Left with no options, Adobe has come out with print ads "We love Apple", "We love Choice" and finally making an effort to connect with the customer.  This is certainly not the last word in this powerful tussle.  It is hard to pinpoint a specific reason for this strongly negative view Apple has been propagating about Adobe Flash.  By trying to push HTML5 instead of already established Adobe Flash, Apple risks alienating customers and developers who like Flash.  Apple might also provide some respite to Google and Research in Motion who are struggling to catch up with their offerings.  Android already supports Flash and Google is obviously using its support for Flash as a marketing tool.  Blackberry is not behind.  Is fighting Flash more important than preserving the strong market position that Apple has with iPhone? Apple is clearly aiming for strong market dominance which is hard to create and sustain in this hyper competitive world. 

In my personal view, "Customer is King".  Future of Flash will be decided by the customers, not Apple. Adobe best chance lies in making sure Flash succeeds on Android and Blackberry.  It is a fight for survival and failure is not an option.

Full Disclosure - Adobe is my ex-employer.  I have never used Apple products even though I admire iPhone and Macs and I hope to buy my first iPhone later this year.

Living Beyond Means Hurts - Even in Greece

You can't live beyond your means forever.  When you borrow, lender expects you to return the money along with interest.  When the borrower is a country, it is assumed that country has an ability to tax its citizens, print money and devalue its currency and pay back the debt.  However, when a country is in Euro Zone, the power of printing money and devaluation of currency is not a choice.  With the recent crisis, euro is coming under strong pressure with break-up now almost imminent.

India has gone through the similar phase in late 80s when Indian Government borrowed a large part of its consumption expenditure through short term foreign currency loans.  India was on verge of default before it pledged Gold to developed countries (by actually shipping Air loads of Gold).  Pledging Gold is known as the last step before bankruptcy and that was enough to prepare the country for hardships that followed.  India did manage to come out of the situation by a steep devaluation, $= 18Rs became $=33Rs in two steps, import duties (already in the range of 50%+) were raised further and tax increases helped mend Government finances.  What followed as a string of financial and economic reforms.

Can Greece learn from the experience? Can it come out stronger than ever before.  History has shown that it can be done. 

Sachin Tendulkar on Twitter

World of Internet is buzzing with the entry of Sachin Tendulkar on twitter.  This event can potentially be a significant game changer for not only for Twitter, but also for Internet penetration in India.  With 60 million Internet users, India has the third largest number of Internet users. Sachin's entry on Twitter may help India move to the top position.

• Twitter got coverage yesterday in almost every newspaper, radio and TV channel.  That's worth more than a few million dollars in free advertising money.
• Almost every Indian celebrity on Twitter is a fan of Sachin and they have posted welcome messages across Twitter
• There is no better icon of determination and success than Sachin Tendulkar in India. 
• During the recent concluded IPL (Indian Premier League), loyal supporters of IPL franchisees will make an exception for Sachin.  Instead of supporting their favorite team, they will root for Mumbai Indians simply because Sachin plays for them. 
• Will more Indians get accounts on Twitter to follow Sachin? Will telecom companies include Sachin's account on Twitter as one reason to buy their mobile phone service (and follow Sachin)? Will Airtel sign up Sachin as brand ambassador and use the punchline "follow me on Twitter"?

I have stayed away from Twitter so far. The question I am asking myself this morning - 'Should I join Twitter'?

Update - Well, thoughts led to action, I joined Twitter today (@jainvivekIndia) and promptly became a follower of sachin_rt.  Hopefully, I will learn the language of tweets in a few days.....

Social Networking and Purchase Decisions

We value opinions of our friends.  We often meet these friends, talk to them or chat with them.  They probably know my preferences and I know some of theirs.  It helps to know what they bought, liked and if yes, why they liked something versus say another alternative.  We seek opinions about movies, schools, products, travel and almost everything we care about. This weekend I shared my purchase decision and several parameters that influenced my purchase of a flat panel TV and I sought opinion from a friend on purchase of an insurance policy. In general, for all complex purchase decisions which have an element of risk (either monetary or emotional) we seek opinions.

Social networking over the web has helped me connect with colleagues, classmates, business associates and also personal friends.  It helps to maintain relationships even at a distance, across geographies, and also be a silent participant in our journey of life, together and yet, distinct from each other.  I recently saw one of my friends seek opinion about a laptop purchase while movies get debated on why someone liked it or not.  I also see comments on new product launches, for example, iPad and this helps shape opinions of passive listeners as well as the active participants in the discussion. 

Web as the medium helps me get into a conversation without being intrusive.  It is easier for me now to pop the question and have my friends comment on it. For example, a telephone call to seek opinions may be considered an interruption in my friend's daily life and I may not want to call 300-400 friends which I have on FaceBook or any other networking site. 

Social networks continue to shape our life.  I can't really imagine a life without them anymore.  They now seem integral part of our life - how can anyone live without them !! I continue to learn and explore how social networking will evolve and influence purchase decisions.  Do share your insights.

iPhone 3Gs Makes a Late Entry

Indian telecom service providers don't subsidise IPhone, with fickle Indian consumer merrily switching between service providers and using multiple SIMs at the same time.  Number of subscribers in Delhi now exceeds its population and Samsung is aggressively advertising its dual-SIM phone.

Last week, both Airtel and Vodafone launched iPhone 3Gs in India - months after global launch and few months ahead of new version from Apple.  That made me wonder if Apple is on the right track in its India strategy. IPhone is no where close to a cult phone in India and Samsung, LG and Nokia are pushing their touch-phones at significantly lower price points.  Apple probably needs to rethink its India strategy.  Otherwise it may be the case of too little too late.  Market skimming strategy works only if there is a large segment of early adopters.  Besides that Apple needs to add India focused free downloadable content - Ringtones, caller tunes, themes, local language songs.  How about a content partnership with IPL and bollywood?  Following Google (YouTube tie up with IPL) is not bad if its good for business. Pre-install of Google Maps, Gmail/Rediff/Hotmail/Yahoo mail will help along with support for dual-SIM and extended battery life.

Side note - For a change, Apple is advertising Macs. I saw two full page ads in national newspaper - though only in the magazine section and that too in the end. Compare this with 1 minute prime time TV ad slots used by HP when it launched "HP Vectra" in India in the late 80s.  Long way to go.  The main hindrance is of course, price, distribution and support - at Rs 56,990, Mac is almost 2.5 times more expensive than a PC.

Look Before You Leap !!

Jobs are back and if you are working for one of the companies who went through challenging times, you may have the urge to take the first job offer that comes your way.  Here are some of my thoughts which you may want to consider.

• Economy is back to growth path again and job scenario will most likely remain good for at least next 12-18 months.  There is no hurry - you can wait for the best offer to come your way. 
• Companies are realizing their mistakes - reinstating promotions, bonuses and moving back to employee friendly HR practices. Give your existing employer a chance.  No one wants to lose a good performer, it is likely that your existing employer will agree to addressing your concerns.
• Changing jobs for minor salary increments hurts long term career plan.  Changing often is not considered good.  A career change which does not give more responsibility is probably going to hurt down the line.  In my personal view, money should be the last reason for making a career move.
• Cost of re-establishing in the new organization and building trust in relationships can easily take between 3-6 months.  If the move involves a change in location, cost of shifting with family may outweigh the benefits.

Change if you must.  Think carefully about the possible results or consequences. Make a considered choice.

Maximum NAV does not Guarantee Maximum Returns

"Maximum NAV Guaranteed" is now the buzzword for insurance companies trying to outsell each other and lure the gullible investor.  Almost everyone has jumped to the bandwagon and this includes ICICI Prudential, Bajaj Allianz, Tata AIG, and LIC.  Here is my humble view -

• If the fund is investing in equities, it is very likely to go up and down with the stock market (Indian or international) and no fund can guarantee that it will give the highest index level over next xyz years.  The only way a guarantee product can work is that the fund will buy capital protection by selling futures (which caps the upside) or buying options (which comes at a cost).  The cost of buying options will be charged to the NAV of the fund and hence, the appreciation in the NAV of the fund will be less than the appreciation in the stock market.
• Alternatively, the fund will invest a part of the fund in debt and use the interest income from that portion to buy put options for the remaining part which is invested in equities.  Hence, the return will be lower than a pure equity fund if the stock market is a net positive over the investment period.
• The fund management company (or insurance company) will charge an additional fee for managing this fund and will further reduce the net earnings.  In addition, investment in these funds have a lock-in and one loses the guarantee promised if the investment is redeemed earlier.

An insurance company needs to protect itself from this risk and cost of this risk is eventually borne by the policyholder.  Any insurance product needs approval of IRDA and IRDA will not allow insurance companies to take this risk on their balance sheet since it will jeoparadize the entire industry.

Recovery : Will it sustain?

Global economy is on a recovery path, led by emerging countries with China and India at the forefront.  This recession was different and so has been the recovery.  Emerging countries like India and China were relatively underleveraged heading into the recession and managed to avoid slipping in negative growth territory.  Last month, India reported IIP (Industrial Production) growth of 16%+, GDP estimates have been revised up to 7.5%+ and jobs are growing in high teens.  Now, the question is if the recovery will sustain. 

• Central banks lag behind the inflation curve - With inflation at 9%+ and food prices up by 20%+, Indian central bank is under strong pressure to increase interest rate.  Markets have already taken that into account, with 10yr Govt Bond yield crossing 8%+ (still implying negative real interest rates).  Monetary policy action is around the corner.  However, central banks are known to be slow in ramping up interest rates as political opposition and recent memories of economic slowdown creates obstacles in decisive action.  We can expect a gradual ramp up in interest rates and with economic growth momentum continuing to build up, we have at least a couple of good years ahead of us.
• Savings rate continue to hover close to 35% - Domestic savings rate in India touched 35%+ a few year ago which was cumulative effect of increase in efficiency of capital deployed by the Government and the private corporate sector.  Increased privatisation of services like telecom, airlines, airports, roads, education and healthcare meant increase in capacity for these services without the Government adding its own inefficiency in capital allocation and implementation.  Historically, India has a incremental capital output ratio of close to 4:1, that is, for 35% savings rate, India can expect to grow at close to 9% over the medium term.
• Increased productivity - Better telecom services, increase in use of IT, penetration of banking services in smaller towns and cities, private investment in road and power and increase in availability of the skilled workforce has resulted in significant increase in productivity across the Indian economy.  Some of the benefits will flow in over the next decade or so, Indian economy will continue to reap the dividend of increased productivity for sometime.
• Diversified economy - India is not dependent on any one sector or industry, even though IT services continue to be an important wealth creator with strong multiplier effect. 

I am therefore not unduly concerned with prospect of increase in interest rates over the next 18 months or so. What's your view, do share in your comments.

6.5 million Online Railway Tickets booked in January 2010

Online commerce in India is increasing at a fast clip. The number of online tickets booked on IRCTC site is up from 4.6 million in April 2009 to 6.5 million in January 2010.  40%+ growth in less than 9 months is a very positive sign.  Railways is one of the largest enterprises in India (by turnover, customers and employees).  Computerized reservations started by Railways 20 years ago brought the benefits of computerization closer to common public.  IRCTC is repeating the same success now in online environment.

From a consumer perspective, online railway reservation saves plenty of time in traveling to nearest reservation center, provides them easy access through any cybercafe, visibility of reservation status and with transaction charges kept at minimal Rs25, it makes economic sense for consumers to adopt.  From Railways perspective, it eliminates the need for new reservation centers, computers and clerical staff for entering data and printing tickets.  For cybercafes, it creates a business opportunity - many of them have become travel agents and provide services like making online payments on behalf of customers and accept service charges in lieu of this service.

Online Airline and hotel bookings are also on the upswing.  Will online retailers take notice? If businesses offer value, Indian customer is willing to make online payments or find ways of doing that.  It is time for them to ask the question - Am I offering real value to the customer?

Me Too Google Buzz fizzles out

Since last week, Google Buzz has created buzz for almost all the wrong reasons. First a me-too product and then a backlash on privacy.  As Google has proved to many of its competitors, a me-too product is a hard sell in the world of free web.  An imitation of FaceBook with little incremental value from integration of e-mail was unlikely to work in any case.

Except for the fact that FaceBook does not provide e-mail service, FaceBook is well integrated with almost all major e-mail service providers. 

• You can import your contacts from popular e-mail sites.  After importing the contacts, I can pick and chose which ones to invite and when. 
• If one of the imported contacts joins the social networking site, I get a prompt about the same. I can invite that person and we get connected (LinkedIn feature).
• Discussions forums, new connections, messages from friends, daily network digests are all integrated with e-mail.

Google Buzz started with its good intentions and try to imitate Yahoo E-mail, which has been trying to build a social network gradually by prompting contacts which I can connect to. Needless to say, Yahoo has not succeeded. I attribute the backlash to lack of strong enough positive features in Google Buzz.  Had there been features which everyone wanted, had there been a choice in what a customer wants to do, it might have worked.

The bottom-line remains - if the offering is good, customers are willing to accept inconveniences and faults, but that can almost kill a me-too service which no one wants. All of us are, of course, wiser in hindsight.

Banks Vs Home Loan Borrowers

Indian Banks continue to follow a teaser pricing strategy - offering a low teaser rate for new customers while older customers pay 2-3% more than the rate offered to new customers.  The way it is done by providing a discount to new customers over the floating prime lending rate (PLR), which bank claim is set based on prevailing interest rate environment.

It is always a risk getting locked into one bank's loan because banks levy a charge if you want to transfer loan from one bank to another.  Even though prepayment charges are often low and nil in some case, it is not feasible for everyone to payback the loan first and then seek a new loan from another bank.  Also, once the property has been purchased, the new loan will be denied for policy reasons (Banks offer loans only for new purchases and not refinance existing properties) or may attract higher rate (in case, the reason cited is home repairs).

RBI (Reserve Bank of India) has issued a circular to IBA (Indian Banks Association) to explain the gap between the two rates and IBA today declined to make adjustments for old borrowers.  Moral advice does not seem to be helping, it is probably time for RBI to issue binding regulatory notifications.  One reason teaser rates are low is because of competition.  RBI should introduce competition once a loan has been taken.  This will keep banks on their toes.  For example, IRDA has capped Insurance Policy charges and mandated surrender charges to be zero for policies older than 5 years. This ensures Insurance companies can lose customers if their service levels fall.  RBI can take the cue and mandate the following -

1. All loans more than 3 years old should have zero prepayment charges.
2. Banks cannot levy loan transfer charges after 3 years of loan. Once competition is introduced for the whole life of the loan, banks will be forced to offer good rates for the entire tenure of the loan.
3. Banks cannot offer teaser rates which are more than 1% lower than the existing prime lending rate (PLR) for home loans.

RBI needs to act and act now.

Jobs are back !!

Indian job market is now back on the growth path, even though it is still down from July 2008 levels. Naukri JobSpeak Index is in positive territory for month of December when compared to last year's level.   In fact, Y-o-Y growth has shown improvement for the last 6 successive months.

Jul09	Monthly -27%	3-month Trailing -21%
Aug09	-22%	-19%
Sep09	-24%	-21%
Oct09	-10%	-18%
Nov09	-5%	-13%
Dec09	2%	-2%

Looking at the sectoral indices, IT Software and Services, Telecom, Retailing continue to lag the overall market, while real estate, NGOs have strong positive trends.  Recruitment is also in strong positive territory.

ICICI Prudential ACE - Its an ACE

ICICI Prudential has recently launched ACE which is much better than my previous best choice for a ULIP (Unit Linked Insurance Plan) - iGain2 from Bajaj Allianz. I discovered this policy almost by accident, since I had given up on ICICI Prudential.  I had hoped for a good ULIP product from ICICI Prudential and have been disappointed for last 5 years. Finally, they have delivered a good product. Thanks to http://www.policybazaar.com for helping me discover this policy.

Here are few plus points for ICICI Prudential Ace

1. Zero premium allocation charge - While IGain2 was the only product which had zero premium allocation (that was not a pension plan), ICICI Pru Ace joins the list. Unlike IGain2, there is no premium threshold which is good for small investors.
2. Lower Administration Charges - With fixed administration charges of Rs 60 per month, the charge is much lower than IGain2 (Rs 100 per month).
3. Loyalty Addition - ICICI Pru Ace will give loyalty addition every 5th year from 10th year onwards - equivalent to 2.5% of average funds in preceding 8 quarters.  This is really significant and effectively lowers the fund management charge significantly below IRDA dictated norms.
4. 2% additional premium allocation - IGain2 offers 2% additional premium allocation from 11th year onwards. ICICI Prudential Ace does a one up on IGain2 and offers 2% additional premium allocation from 6th year onwards.
5. Lower mortality charges - ICICI Pru Ace has lower mortality charges as compared to IGain2. They are still higher than other insurance companies (for example, Aegon Religare).  However, benefits on other charges makes up for higher mortality charges, if you are looking for 5X sum assured. For 20X sum assured, you may want to check the final illustration to make the comparison.

Now the downsides -
1. Less flexibility - Only 4 switches are free, partial withdrawal allowed once in three years and limited only to 20% of funds, and host of other restrictions (for example, loyalty additions only if all premiums are paid).

I am concerned by this 3 year lock-in between partial withdrawals.  Financial exigencies can happen anytime and such restrictions can cause serious damage in the future. I also don't understand the purpose behind this restriction since I can always surrender my policy.  When I can make 100% withdrawal, why is ICICI Pru not allowing me to make partial withdrawals at will.

Update (9th Feb 2010) - ICICI Prudential ACE cannot be structured as a Children Insurance Plan, unlike IGain2. If you are looking a Children Insurance Plan, IGain2 is still the best.

2. Premium allocation charge on top-ups -ICICI Prudential Ace has 1% charge on top-ups which is the anti-thesis of existing ULIP structures.  Current trend is zero allocation charge on top-ups and 5%+ premium allocation charge on first/second year premiums. Since I don't plan to do top-ups, I am fine with this.
3. Online Systems and customer service - Despite ICICI group's focus on technology and customer service, I have found that ICICI Prudential Mutual Fund's IT systems lag behind modern times.  Online purchase of Ace does not work at present (link throws up a server error). So far, my experience with Bajaj Allianz online system and customer service for IGain has been good.
4. Fund Management Charges- Fund management charges are now standard across most ULIPs with IRDA dictating them.  Before this regulation came into force, ICICI Prudential had the highest fund management charges. However, Ace seems to match the charges with other ULIPs now, except for debt funds.  Unlike other ULIPs which charge 1% or less for debt funds, ICICI Pru Ace charges 1.35%.

As usual, please consult your financial advisor before making a choice. I don't recommend any financial investment products and please make your own decision taking all other factors into account.

Market Leadership Feeds on Itself

Market leaders across product categories benefit because of their leadership position. High volumes enable a strong channel presence. Counterparties give them first preference when looking for partners and regulators and policy makers listen more to their views. Finally, customers prefer to buy what everyone is buying. This is visible cross product categories. Here are a few examples.

Maruti Suzuki leads in the small car segment and has over 50% market share of the overall car market in India. Customers see more Maruti cars on the road than other brands. Product volumes support a lower cost structure which feeds on itself. Maruti has been using its strong dealer and service network as an important messaging pillar in its marketing communications (a traveler finds a service station on top of the mountains). However, we must also give credit to Maruti for maintaining a strong product line, high service quality standards, low cost of maintenance and also its strong presence in pre-owned cars.

Microsoft is another clear beneficiary of its market leadership in desktop software. Its strong presence in educational segment, a strong network of training institutes supporting Windows and MS Office software, and unintended benefits of piracy – all of have helped Microsoft retain it stranglehold on desktop software.
a) Linux has remained in confines of enterprise server market while Apple has failed to execute well in emerging markets like India.
b) Assembled PCs using Intel software have maintained high market share until recent reduction in taxes have led to increased presence of branded PCs. Assembled PCs often have pirated software. This increases price differential with Macs. At the same time, Apple has failed to justify its price with the value it delivers. Needless to say, Apple has almost negligible market share in India and that too can be attributed to technical staff in enterprises convincing their employers to grant their wish as favor. I have seen a strong tussle between employee’s desire for Macs and enterprises reluctance to pay for what is seem as non-essential purchase.
c) The biggest challenge for Apple in India is visibility. Most consumers don’t know about Mac or its benefits. Even if they know about it, they don’t consider it as a viable option. There are very few evangelists for Mac in India, which is the strength of Apple’s marketing in the developed world. Apple needs to fix the awareness issue first. Second most important issue relates to cost of purchase and maintenance. Thirdly, it is important to induce trials to create a positive word of mouth. Make the initial consumers "WOW!!" with the product and customer support. Make them your evangelists.
d) Changing consumer preferences takes time, investments and most important, patience from top management. When Kellog’s entered India, they were willing to wait for 20 years to make profits. Is Apple willing to invest and wait? Is Apple willing to take up the challenge? Success will be hard, but is very much possible.

While it is easy to understand why market leadership helps in physical world (role of dealer and service network), the effect is also visible in digital world, for example, Google commands over 90% market share in India compared to much lower market share in the developed markets.
a) Good word of mouth publicity has probably helped Google the most. A new customer often looks to peers or experienced users for guidance on which one is the best to use.
b) Google has obviously benefited from Yahoo’s failure to execute well. You need to look at Google maps and Yahoo maps for India to see why Google has succeeded while Yahoo has not.
c) Yahoo has not managed to beat rediff or indiatimes on news content. Rediff and Indiatimes have leveraged their early entry, along with local content and partnerships. Being a late entrant with me-too offerings has limited Yahoo’s success in India. On the other hand, search has natural economies of scale. Local players are not able to compete with size and scale of Google.

In two of the three examples, global leadership seems to imply market leadership in India. Maruti Suzuki is the only one exception. Success of Maruti Suzuki can also be attributed to strong support from government in its early days and a favorable regulatory regime towards small cars (a segment in which Suzuki has strong presence). In technology, one call probably say that global leadership makes a huge difference in the Indian market as Indian consumer still considers herself as a follower and takes lead from others on what is the best product to use. Presence on strong Indian community in the US and its strong technology linkages has meant that LinkedIn and Facebook are growing at a faster pace in India.

Apple iPad - Wait for v2.0

Apple iPad is probably one of the few Apple products which have a confused positioning.

It is not a mobile phone- it is too big for that purpose.  Those expecting it to be an extension of iPhone did find that similarity. However, they are underwhelmed as iPad does not seem to have made effective use of higher computing power and screen space.  Lack of Flash support and its central position in Apple's marketing blitz is intriguing. It is hard to understand why Steve Jobs chose to demo "absence of Flash" rather than positives of iPad.

iPad is not as functional as a laptop.  Absence of keyboard makes it a less efficient tool for professionals who travel but still need a fully functional computing system.

iPad also does not serve the purpose of stress free book reading, a market which Kindle dominates. Even though a few reviewers give iPad's high screen resolution a thumbs up vs. Kindle. Kindle is still under threat from v2.0 of iPad. As Nick Marshall points out, "Kindle is a one-dimensional device with limited format support and .... competes in a micro niche.  The distinct advantage the Amazon Kindle has over the Apple iPad is the data subscription fee."  That said, e-book reader is a much smaller market and unlikely to touch millions of iPhones and iMacs.  

Another usage scenario is head on competition with Tablet PCs or netbooks.  Tablet PCs is a niche market with most common usage in the healthcare industry.  Doctors are finally being forced to move towards e-prescription and tablet PCs are more user friendly and time efficient than PCs.  However, compared to Netbooks, iPad does not make the cut. And as Nick Marshall says "Price-wise the $499 entry level iPad is still over 60% more expensive than the Dell Inspiron Mini and lacks many key features: multitasking, hdmi video output (external monitor), optional external dvd drive and front-facing camera (web cam)."  That said, Apple has huge volumes when it comes to components like touchscreen, batteries and can use some of its iPhone component advantage. iPad v2.0 can spell the doom for net-books and tablet PCs.

iPad is probably a niche product and will remain so till next version of iPad makes significant adjustments to price and product positioning.  iPad v1.0 is probably not going too far, however,  I am going to wait for v2.0 before writing off this product.

Currency and Real Estate

Indian rupee appreciated in 2007 after almost 15 years of unidirectional decline.  From Rs 18/dollar in 1991, Rupee went beyond Rs 50/dollar. During this period, annual depreciation of Rupee by 4-5% was taken as given. In 2007, that changed forever. At this point in time, the probability of appreciation is more than depreciation in the value of the Rupee.  In general, the value of a Currency is a complex variable which reflects confidence of investors and overseas citizens/persons of Indian origin as well as the balance of trade in goods and services.

What will be the potential impact of currency movement on asset prices? that's an interesting question.  In a way, currency appreciation increase the prices of Indian assets in dollar terms and hence overseas investors make profits if rupee appreciates.  Investment flows in anticipation of rupee appreciation creates more demand for domestic assets and hence pushes up asset prices (be it equities or real estate).  The counter effect comes from decline in viability of export driven business or loss of competitiveness of domestic producers.  For example, rupee appreciation lowered margins of IT and IT Enabled Services which reduced their expansion drive in Gurgaon and hence resulted in steep decline in real estate prices. Other assets like gold and commodities are trade-able globally and their prices are determined on global demand and supply with little co-relation with domestic demand and supply.

There are other trends which suggest Indian real estate is a good asset class - high population density, migration of workforce from smaller towns to Metros, increased urbanisation of the society and higher income/savings rate. Real estate also provides a rental yield of 4-6%, compared to dividend yield of less than 1% for equities. Tax benefits on interest payments and easy availability of housing loans make investments attractive.

That said, property prices have appreciated significantly in last 6-7 years, for example, by 7 times in Noida and 4-5 times in Delhi, which is significantly higher than long term price appreciation trends. Is Indian realty good investment at current prices? There is no easy answer.  However, with strong focus on infrastructure growth across large Indian cities, betting on Indian real estate is not without merit.  Opportunities vary across locations and as always, buyers must conduct due diligence before committing capital.

Illustrations and ULIPs - 10% returns in a debt fund !!

I was surprised to find insurance companies using illustrations with 10% expected return using the fund management charges(FMC) for a debt fund.  We know that 10 year GSec bond yield ranges between 7.5% to 7.7% these days.  Good quality corporate paper offers a few percentage points more. Therefore, I find it hard to accept that debt funds can return 10% over a long tenure of investments which ULIPs expect.  Of course, insurance companies are trying to impress investors by using a lower cost fund as IRDA guidelines are silent about which fund to use. In almost all ULIP offerings, FMC for an equity fund range between 1% to 1.35% (thanks to the new cap by IRDA) while debt funds FMC ranges between 0.75% to 1.25%.

While comparing insurance policies on www.policybazaar.com, I found a few policies yielding 8.74% (on expected return on 10%) which is next to impossible if FMC charges for equity fund is close to 1.25-1.35%.

Please watch out for this when you look at the illustration. Here is my recommendation - use debt funds FMC when comparing based on 6% yield and insist on using the equity fund FMC for 10% yield benchmark.

I continue my search for lowest cost ULIP.  So far, Bajaj Allianz Igain II is best.