Camejo still bullish

Jose G. Perez jgperez at
Sun May 13 14:57:49 MDT 2001


The short-term trajectories of capitalist economies are not easy to unravel,
as there are many and often contradictory influences.

I think Peter's *analysis* of the economic situation is essentially correct.
He pitches it in terms of the stock market because that's his racket. But I
essentially agree with him that there are two things going on:

One looks like a pretty plain-vanilla cyclical economic downturn, a "crisis
of overproduction." This has been going on for a while in manufacturing
especially. And we're seeing all the normal tell-tale signs of such a
situation -- a rise in unemployment, a drop in labor productivity, etc.

The other is the deflation of the great dot-com and high-tech internet
bubble. This started out as a stock market bubble,
but soon spread out into the real economy. The high point of the bubble was
AOL's buyout of Time Warner. Time Warner represents 80% or more of the new,
combined AOL Time Warner, but Time Warner stock owners only got 45% of the
new company.

Just like during the "tron" (electronics) bubble of the Kennedy-Johnson
years, rich people at the cusp of the new century were willing to throw
unlimited amounts of money at anything with a "dot-com" in its name. The
most unlikely "business models" attracted enough capital to make a go of it,
like the "Free PC" company, courtesy of which I'm writing you these lines.
Over a six-month period they gave away 20,000 computers, more or less,
including free internet access, which would be paid for by advertising that
would be constantly displayed on the left and bottom of the screen. Then, of
course, it went broke, and got acquired by emachines, which had supplied
many of the computers. Emachines itself has now gone bellyup, but that is
more the result of the crisis of overproduction, which has hit the computer
sector especially hard.

Cyclical downturns can take a devastating toll on makers of PC's and similar
equipment (routers, servers, etc.). These are in fact *perishable* goods in
a sense, even without a recession or downturn they loose value every month
they sit on the shelf. To see a demonstration of this in action, go to Tiger
Direct and check out the ungainly Gateway all-in-one 500Mhz celerons with
built-in LCD displays. They sell for $500, which is the ultra-discounted
price of the display alone.

Despite the bubble and its deflation, I remain inclined to thing that the
above-par gains in labor productivity we saw during the Clinton presidency
have not exhausted themselves. There is more of the "computer revolution"
coming, although it isn't easy to foresee its forms.

But I can see it where I work, and in other industry sectors. Right now the
CNN video library is installing, not one, but TWO "deep blue" supercomputers
(the same as beat the world chess champion). The idea is to completely
digitize and integrate into a monster data base all of CNN's video, and make
it available at the desktop. Right now the organization as a whole spends
incredible amounts of time handling video: recording incoming feeds,
labelling it, filing it, retrieving the tape, duping or editing it, putting
it back, etc. etc. etc.

At the level of the individual producers and correspondents there are also
revolutionary changes. $3,000 DV cams will do most everything the
professional $30,000 or more "ENG [Electronic News Gathering]" cameras can
do. But even better, with a firewire port you can dump the video into a
laptop and edit a piece, including effects like dissolves and wipes which
you used to need a mini-control room to do, although nowadays they can also
be done in non-linear editing suites like those sold by Quantel and Avid.
But those suites cost $100,000 and up; the laptop, maybe $2,000 or $3,000.

The issue isn't even so much the capital costs that are being "downsized,"
but the amount of labor time that is saved. The pieces are beginning to fall
into place to handle video like text is handled, via automated sends and
receives using computers which automatically file the stuff for us.

Just imagine replicating the functionality of this list and its associated
web site using 1970's technology, electric typewriters, photocopiers, mail
and so on, and the kind of staff that would be required. That's the sort of
shift that is taking place in TV news, and we're a VERY long way from
completing it. And I believe similar technological revolutions are still
ahead in many industries.

This, of course, was the kernel of rationality in the "irrational
exhuberance" of the dot-com bubble. But despite the bubble and its collapse,
technological advance will continue to favor enhanced productivity growth,
compared to the 1970's and 1980's.

What drives it is Moore's law, the observation made by the founder of Intel
that every year and a half or so you could put twice as many transistors in
a given area of silicon. Everything seems to indicate that it will hold for
at least a few more cycles. And what is even cooler, the smaller the
components on the chip are, the faster the chip can go. So you get a double
bang for your buck when you move microprocessor fabrication to the next
smaller size. You can have a more powerful processor, because you can put
more transistors on the chip. And you can have a faster clock speed, because
the smaller transistors use less electricity, and dissipate less heat, at a
given clock setting.

And the technology developed for microprocessor fabs finds new and
unexpected applications. One was just announced by IBM, a way of depositing
a layer of carbon a few molecules thick on the liquid crystals at the heart
of LCD displays, which will replace a step in the manufacturing of these
devices that accounts for a lot of the cost and is also where a lot of units
go bad (yields in LCD screens are notoriously low, making them is very

This doesn't mean AT ALL that the business cycle has been "repealed," nor
that any slowdown will of necessity be extremely mild. The rate of
technological change adds ADDITIONAL voltatility to a system that's none too
stable to begin with. It is true, I think, to say that, on average, "all
other things being equal" and so on this technology "bonus" will *tend* to
make contractions less severe, just as it tends to, and I think in fact did,
make the long expansion of the 90's more vigorous. But in the economy things
don't just "average out," the capitalist system is, I think, not just
socially "chaotic" but chaotic in the mathematical sense as well.

I do disagree with one aspect of Camejo's immediate perspectives. I don't
necessarily think we've seen the end of the deflation of the dot-com stock
market bubble. The dot-com part of it has been pretty well deflated, but I'm
not so sure about the high tech equipment manufacturing side of it.
Valuations, measured by the traditional price-to-earnings ratio, are still
quite high by historical standards. I wouldn't be in the least bit surprised
to see the NASDAQ drop another 1000 points from where it is now (I think
somewhere around 2500, although I don't know -- I don't really follow stocks
closely at all), with corresponding declines in the rest of the market.

Camejo is interested in that because it's his work, betting on stocks. I'm
not particularly interested in this.

But the issue of whether "asset management" of some sort will actually
outperform the proverbial monkey throwing darts at the stock listing pages
in the New York Times is a different one from an examination of the economic
trends. The academic demonstrations that day-to-day stock price fluctuations
are random, meaningless "noise," are pretty convincing , as is the data
tending to show the monkey will outperform the asset manager just about
every time in stock picking.

The arguments against it being possible to come up with a sure-fire stock,
timing or sector-picking strategy that will outperform the stock market as a
whole are summarized in the book, A random walk down Wall Street, which I
highly recommend to anyone who feels in the slightest bit tempted to "play"
the stock market. The book also explains phenomena like particular
investment funds and managers doing very well for a year or a number of
years, and why past performance isn't just no guarantee of future results,
as the disclaimer in all the ads say, but it isn't even predictive of future


----- Original Message -----
From: "Louis Proyect" <lnp3 at>
To: <marxism at>
Sent: Saturday, May 12, 2001 1:41 PM
Subject: Camejo still bullish

[This is from a letter from stockbroker Peter Camejo to his customers,
which can be read in its entirety at While Camejo
apparently sold Progressive Assets Management, a so-called social
investment company with branches in over 6 cities, to investors some time
ago, he continues doing business from an office north of San Francisco.

[Before restyling himself as a social investment broker, Camejo was an
ex-Trotskyist leader trying to launch a non-sectarian left formation in the
USA. Many of my ideas on the problem of "democratic centralism" were lifted
from him. While I was working with him on this project in the early 1980s,
I discovered that he was becoming more interested in the stock market than
socialism. Until the mid-1990s, Camejo tried to maintain an appearance of
using profits from his business ventures to further the radical movement.
No such pretensions exist any longer, at least based on a cursory
examination of his website.

[As far as the letter is concerned, it expresses a peculiar kind of
bullishness influenced by his Marxist past. It smacks of Ernest Mandel's
"long wave" notions, in my opinion although he has enough good sense not to
scare his customers away with references to the deceased Belgian Trotskyist
leader, who remained a maverick to his dying days. Camejo's bullish
economic views were presented in a more elaborated form in a 1999 issue of
Against the Current as part of a series of responses to Robert Brenner's
article predicting a global financial meltdown, a shorter version of
something that had already appeared in the New Left Review. My own take on
Camejo's bullish Marxism stands up pretty well, in light of the NASDAQ
nosedive. It can be read at: ]

March 18, 2001

To All Clients

Dear Clients,

With this letter you are receiving a newsletter written primarily in
January of this year. I am enclosing this letter to bring some of the more
recent market developments up to date.

We are living through a rather unusual bear market. Simply put we are going
through two bear markets. The first is a "normal" cyclical bear which
appears about once every four or five year with about 20 to 30% decline
(the S&P 500 is down 25.9% from its high) combined with a crash in the
NASDAQ composite that has dropped 62.8% from its high of 5078 on March 10,
2000 to 1890 as of today.

Since the time I prepared the newsletter evidence is growing that the
economy, while mixed, is slowing. Therefore for example, the semi-conductor
drop is not only an inventory problem, as many originally thought, but also
a product of an end user slow down. The semi-conductor index, the SOX, is
down 61% from its high.

In the newsletter I refer to two possible explanations. I refer to these as
A or B. A being mainly an inventory issue and B being a more serious
economic slow down. Greenspan is arguing for explanation A and recently
stated he feels the inventory build up is starting to bum off The market is
saying B is correct and Greenspan is behind in cutting interest rates. I
remain in camp A but feeling less confident each day as the market
continues its free fall.

During this drop we focused on tiying to buy into the extremely low
valuations of quality companies, primarily in the technology sector. The
error in this approach is the degree of the drop we are going through.
Taking advantage of this drop and buying a little Ariba (ARBA) when it went
from 180 to 37 was obviously a mistake, since it is now 10. That drop is a
94% drop. The crash of 1929 was an 88% drop. For some individual technology
leaders like Ariba ("B2B" software) this crash is similar in magnitude to

What is so different from the only other two times drops of this degree
have occurred (1929 and 1973-74) is the economic background. In 1929 we
were at the beginning of a depression. At that time, interest rates were
mistakenly raised for a period and tariffs increased. Today, the fed is
lowering interest rates and the federal government has a surplus. Sooner
rather than later, someone will tell President Bush to stop talking about
not spending and start helping with fiscal stimulation. Unemployment is
below 5% and certain sectors of the economy (e.g., housing) seem to be
holding up. This is not at all a similar framework to 1929.

In 1973-74, the nation was facing strong inflationary pressures and the
market came off what amounted to a 40-year bull market. This bull market is
only 19 years old with little inflation. THIS IS NOT THE END OF THE BULL
MARKET. Even technology, now declared dead by many commentators, is quite
alive. We are living through a profound technological revolution that is
accelerating, in spite of short periods of slowdown in its growth rate.
Nothing moves in a straight line in terms of the economy and the market.

Louis Proyect
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