TUESDAY JANUARY 12, 2010

"Targeted"

It takes a certain amount of intellectual hubris to be able to predict the future, or at least to think one can.  History is filled with predictions that were sadly inaccurate and/or shortsighted.  In 1983, the CEO of computer giant Digital Equipment, Ken Olson, asked why anyone would want or need a computer in their home.  Heck, if we didn't need them in our home, we certainly didn't need them in our hand!  Today, the smart phones we carry have more computing power than the mainframes of Mr. Olson's time.  In short, it is dangerous for any individual to impose their view of the economic future on the rest of us.  The creativity of our economic "animal spirits" continue to create and develop new products that most of us couldn't have thought possible or even necessary.  Because these new products, hundreds and thousands of jobs have been created over the years.

Yet, in Washington, the word of the day is that the government is going to create jobs by spending money that is "targeted."  Targeted at what?  There is no question that our country needs new job creation.  But can the government possibly "target" investment in such a way that will allocate the capital more efficiently than the animal spirits?  Recall that the first two stimulus plans, totaling nearly $1 trillion, was going to keep unemployment under 8%.  Oops!  Recall the urgency of passing the plan so that job creation could begin immediately.  Here we are, almost 1 year later, and less than half of the second stimulus plan's $787 billion has even been spent and reports indicate that money targeted with great fanfare to "roads and bridges" had no impact on job creation. Now, today, some call for yet more spending, only this time the plan will be even more "targeted" with a particular focus on "green" (whatever that means) jobs.  Hey, I got an idea.  Maybe we can spend $50 billion on ethanol production.  Oh wait, we already spent (wasted) billions on that green industry with little to show for it.

Maybe we should just let the animal spirits target the investment.

POSTED AT 1899-12-30 13:13:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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