March 5, 2008

Rapper turned Hip-Hop mogul Jay-Z once said, “I don’t have the bright watch. I got the right watch. I don’t buy out the bar. I bought the nightspot. I got the right stocks. I got stock brokers that are moving it like white top.” And for those who listened closely, they more than likely heard the nuggets of wisdom concealed in his seemingly braggadocios statement. As most of Hip-Hop’s top moguls already know, Wall Street is where the ambitious go to become rich and where the rich go to become wealthy. Just look at the recent surge of investors and fund managers who have made millions, and in some cases billions, thanks to hedge funds.

Enter Thrasher Capital Management, also known as “Thrasher Funds”—an investment portfolio management company co-founded by childhood friends James Perkins and Khalid Jones, who are sharp enough to be the brokers whom Young H.O. was referring to on “30 Something.” Perkins— who has worked for a number of high profile investment firms including Morgan Stanley, one of the biggest investment banks in the world—and Jones—who received his law degree from the highly distinguished Stanford Law School—are behind Thrasher Funds’ GendeX Mutual Fund, which is an investment program that relies on pooling together capital from many investors. The company then invests it into a collective of stocks that capitalizes on the buying habits of young adults as well as baby boomers, who increasingly seek to emulate a younger lifestyle (recall the old guy you saw trying to “Crank Dat” at the club over the weekend.)

The strategy behind the GendeX fits right in tune with the marketing power of the Hip-Hop culture, which is responsible for setting the buying trends amongst many young adults. Just imagine if when the Escalade, the Ipod or when, more recently, Nike Dunks and the Nintendo Wii became popular, you owned a stake in any those companies! Just by being informed and participating the latest trends, you could have been putting money in the bank for a change (no pun.) While these stylish, savvy 20somethings may not have you laced like Hov or Diddy on a yacht off the coast of Saint Tropez, they hope to help people just like you learn about the stock market and how to invest wisely for the future. Pay attention!

CORPORATE TAKEOVER: What sparked your interest in investing?

JAMES PERKINS: [Khalid and I] are actually both childhood friends from Little Rock, Arkansas. One of the big things that sparked my interest [in investing] was when I decided to go to Yale for college. Down south, you really don’t see Wall Street or the investing markets as such a nucleus to society like the way it is here in the northeast. That was one of the biggest things that caught my attention. When I first moved here, I remember taking the train back to New York to come home for the first time when I was a freshman. I was taking the train from Connecticut to New York and it was like 5-6AM in the morning. I thought there couldn’t be anybody possibly up at that time. But as soon as the train hit Greenwich, Connecticut at around 6-6:30AM, everyone on their way to Wall Street got on in their trench coats with their Wall Street Journals. Everyone was reading or doing work before they got to the office. And I thought about how most of America [was] still hitting [the snooze button] on their alarm clocks for the second time. Meanwhile, these guys are up trying to figure out what their strategy, just for that day, was going to be. That was something I felt like I wanted to be apart of and was a cool concept.

CT: I see that you were a chemistry major at Yale

JAMES: Yeah, I was a chemistry major. My Junior Year, I interned at Morgan Stanley and learned a lot more about Wall Street. My Senior Year, I came back and started a company called “Next Investors,” which [focused on] the next generation of investors and what [they] could mean for the stock market and financial services in the future.

CT: Looking at your bios, it seems like both of you could easily have gotten high-paying jobs working on Wall Street, due in part to your education and job experience. What inspired you to form Thrasher Capital Management and venture out on your own?

JAMES: People will tell you it was opportunity, luck and what not. But I think one of the biggest things was that we talked to some executives about the idea and the company. And quite frankly, they were too comfortable to do something like this. They can wait and get large chunks of money from much larger clients and really just ignore this demographic, which is going to be so important to the financial markets in the next 5, 10 or 15 years. And, kind of in a Warren Buffet kind of way, we were thinking long-term about—whoever puts the time in right now in this space, will be the premier money manager to this demographic in the future.

A lot of it is also a labor of love, and it was also an opportunity to really innovate the financial marketplace and services. When you think about most innovations in this space, they have all come at some level of access, you know? The mutual fund really allowed working people to save for their retirement. Charles Schwab allowed people that were really not that much into Wall Street to participate in trading. And now what we are trying to do is provide the next generation of people [the opportunity] to be involved. [We want to] provide knowledge and educate them, and get them involved in our products as far as the GendeX Fund and some of our other educational things, such as our videos.

CT: How did you guys go about raising the capital to launch the project? and what role did your previous experiences play?

JAMES: [Previous experiences] played a very important role for me. People will watch you. They want to look at what moves you make, what your reputation is, and the places you were able to get jobs prior to starting your own thing. A good friend of ours–who is almost like a family member to me by now—offered me the opportunity to start a hedge fund after I left Ziff Brothers. So it started with the hedge fund. I started Next Investors in college, and Khalid and I co-founded Prism Investments.

And again, that was where we were working with Manhattan young adults and trying to really get them excited and motivated about the financial markets. And so we were always continuing to formulate the idea, the marketing schemes, the investing ideas, and when the hedge fund opportunity came, I really analyzed it and said, “this probably looks like the opportunity we are going to get to take this idea to the market.” And we were planning to do the mutual fund soon there after. So that’s how that came about.

CT: I’ve heard you speak about the strategy behind the GendeX Fund as having a mixture of investing and lifestyle. Can you go into a little more detail about the thesis behind the Fund?

KHALID JONES: The thesis does have some mixture of lifestyle and investing, but not in a way that the lifestyle element trumps the investment one. We invest with what we call the “Demographic Conversion Thesis,” which is the general idea that the older generations are living longer and living younger lifestyles. While, at the same time, younger generations are coming in contact with capital at unprecedented levels. So there are certain companies, certain industries, and certain sectors that can take advantage of that. And we see that not just in one place. You know, a lot of people will say, “Oh, that just means retail stuff.” And that’s just the easiest way to understand it; Polo, Louis Vuittion, and things like that. But we see this playing out all across the market in defense, biotechnology, retail, and tech.

CT: What are some of the companies that people would know that makeup the GendeX Fund?

KHALID: Companies like Polo and Louis Vuitton, to mention two. And there are companies that people are familiar with in ways that they don’t know about like Archer Daniels Midland. You probably eat food that comes from an Archer Daniels Midland farmer everyday of the week without recognizing it. They also make more ethanol than any other company in the U.S. There are a lot of recognizable companies that we hold like Nike and Google. We hold a lot of companies people interact with on a daily basis, and companies they might hear about in the news everyday. And we also hold companies that they should know about.

CT: How well is the strategy working?

KHALID: We’re up by 4% right now. [In reference to the broad market, not in absolute terms]

CT: So how do you guys see the market downturn affecting the fund?

KHALID: We’re not impervious to it just because we are cooler than everyone else [laughs]. In a certain sense, we wished we could have lost under more favorable market conditions. You come out and the rest of the market is going up too, so that really doesn’t say anything about your chops as an investor. Also, If we can get people to buy into what we do right now—which is the idea that they can be apart of the market—then as a consumer, you don’t just go buy Nike. You think about owning Nike!

In a time when the market is down, they will learn a very valuable lesson. And that’s that markets don’t always go up. You have to be very disciplined through it. It would be bad. Say you came into the fund when we just opened and we shot up—Bang! 10%. And you’re like, “Damn, I’m with this. The markets can only go up. I can only make money.” And then the first downturn in your money, you are going to be coming to us saying, “Where the hell is my money?! I thought this thing was just suppose to make money!” So right now, it’s a really good opportunity for us to teach people as well as get them involved.

CT: What advice would you give to someone who does not have tons of money, doesn’t know much about the stock market, but they are really interested in starting to invest?

JAMES: You have to start! One of the biggest things that we are trying to champion is getting people to start. I say it all the time—we are not asking people for money, we are trying to inspire then to start their investing life. A lot of people are like, “I’m going to wait for that job. When I start making this amount of money, I am going to start to save” Or, “if I can get this to happen, then I’m going to get all this money. Then I’ll invest.” And it just doesn’t happen like that, man.

You can see some of your favorite people on MTV Cribs, and clearly they got a large windfall [of money] at one point and time. But the average person’s best bet, and Khalid and I don’t even like to say the “average person.” We’re not into the whole celebrity thing. We think it’s just people. But the best probability that you are going to be able to live like that is to start saving now at whatever level you are, which is one of the biggest reasons we have the minimum investment amount being a $100 and $50 per month. We want people to, obviously, give more than that if they can, but we also wanted to—to put it as one of our friends said, “There are no more excuses for not investing anymore.”

KHALID: The surest way that anybody can retire rich is to start early and be disciplined. And that can be with as little as $150 a month. People shouldn’t feel like they have to put a whole lot of money in. But specifically, to answer your question, that was the question we asked ourselves: “What does somebody do if they just have $100 to invest?” So we put out the answer to that. We don’t want people to invest in our fund just because they see us, and they think it’s cool, hot or whatever. We want them to actually sit down, look at the company, look at our backgrounds, and make an informed decision. If anything else, we are getting the conversation started that no one else on Wall Street is willing to get started. And that’s just as important. Readers of yours will see that you are talking about this issue and it’s important to them, so then they will feel like it’s important to them as well. It’s a dialogue that needs to get started.

CT: Over the last few months, the markets have not been doing so well in reaction to the sub-prime mortgage mess. Then you take into consider the slowing economy, a weak dollar, rate cuts, and a looming presidential election. What effects do you see these events having on the markets?

KHALID: It will be tough to say. If I could answer that question for sure, I wouldn’t be having this conversation with you right here [laughs]. We’d all be having it on vacation right now. I think the most important thing to take out of your question is that, people shouldn’t be thinking—especially in the beginning with smalls amount of amount—about the near term. So we are not thinking about what the market is doing—obviously, from a macro level we do think about it. But we don’t encourage people to focus on what the market is doing in the next month, 2 months, or 3 months. We want to encourage them to start to think about how they can build for the next year, 2 years, 5 or 10 years. Because once you start holding out and standing on the sidelines when the game is being played, it can go up and down in the interim, but you haven’t even gotten started! People should stay informed about what all those issues are, but not let them affect getting in the game. Please trust that there are a lot of people out there that you see on CNBC, FOX Business News, the Bloomberg Channel, and everything else. They are commentating about the market and what it’s going to do on a day-to-day basis, but they have tickets to the game.

CT: Speaking of the presidential election, which candidate do you think is best suited to help the economy rebound?

KHALID: That’s really tough to tell. We were looking at all their economic packages, and all their tax packages. And it’s a different era now. It’s not guaranteed that someone is going come in and be able to boost the economy. You see even the current administration right now signing bills for the Economic Stimulus Package. Whoever the president is going to be, they have a lot of work ahead of them. The biggest wild card for the economy is going to be the war [in Iraq] and what happens to it. Right now, we allocate vast amounts of funds to that effort. If that continues, it will have an effect. So, certainly, the outlook of the new president on the war will have an effect. And honestly, there are a lot of things that are outside the president’s purview that will have an effect.

At this point, someone could come in and have the greatest economic package in the world. But if certain events surrounding it don’t happen, then there is nothing they can do. Conversely, if differing marketing conditions come about, different world and geo-political conditions come about, you could have a fairly poor economic package and it works out for you. So I think it’s too early to tell. We’ll get some more clarity on that during the middle of the general election, probably.

JAMES: From an investor standpoint, you also want to always be able to—one of the things that the professionals do, versus retail investors— look at all the possibilities and what might happen, and whether or not that is what you want to happen. So play out through all those scenarios, and see where you might want to be in your investments or portfolio. And no matter who wins, see what those outcomes are.

CT: Despite the current state of the economy, someone must be making money. Which stocks are doing well right now, and which ones do you think will continue to do well?

JAMES: For our portfolio, the proof has been in the pudding. We’ve seen Urban Outfitters(URBN) be a great out-performer. We’ve seen Archer Daniels Midland(ADM) be a great out-performer. We’re not just into what looks good. We try to be relevant with our demographic and their views. Archer Daniels Midland is the largest bio-fuel producer in the world. And we’ve seen their alternative fuels mandate really pay off in this kind of environment, particularly with inflation and high oil prices. The there are other things that we’ve also suggested, which are slightly out of the box. But we’re not out to prove the market wrong. There is a gold ETF [called] GLD, which is also one of our great performers.

I think that what Khalid was talking about earlier in the interview was: we’re not just something that’s cool. We are also really trying to make sure people get across that we are providing them with very high-end money management services. And that speaks in the out-performance of the fund itself.

KHALID: Your question actually raises a good point for your readers and people who follow the site. We teach people to start with the research—not just go out and buy things that you know. Start with your research. James talked about gold. Gold and platinum, this year, have hit record highs. Gold has gone up to $1,000 [per ounce] and platinum has gone up over $2,000 per ounce. The way that [most of us] are familiar with gold and platinum is 500-thousand records sold and a million records sold. But every piece of culture and input of knowledge, from your culture that you have, can be used in the stock market. And that’s our point! So we did a video on how platinum went up over $2,000 and related that back to when Jay-Z dropped “Reasonable Doubt” for a timeline. Intertwining those worlds is important, and it’s always going to be a good starting point to do your research.

CT: Are you guys planning anything this year in regards to new business ventures and Thrasher Funds?

KHALID: We want to get ThrasherTV to a good point where that’s a vehicle for knowledge and for learning. So we’ve got some new ThrasherTV shows. James has one that he is doing called “Cappuccino Thoughts,” and that’s up [on the Youtube channel] now. It’s basically a weekly/bi-weekly market re-cap and things to look for in the future. And we’ve got some other things for ThrasherTV. As for as the [GendeX] fund is concerned, by the end of today (3/4/08), or certainly by tomorrow, people will be able to go online and invest and setup an account directly through our website, ThrasherFunds.com. So that is something we are really excited about because that’s how we traffic.

JAMES: We are raising more money so that we can do more things and really provide more for this demographic. We are talking to investors now for our next round of fundings, so hopefully we can continue to supply cool ideas like Khalid’s “2 to 4,” my “Cappuccino Thoughts,” and things of that nature.