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Interviews

An Interview with Marc Perkins, Former Perkins Capital CEO and Barron’s Roundtable Member

Marc Perkins is the President and CEO of inc.jet Holding, Inc., formerly the publicly-traded company Gunther International, which designs, manufactures, and services high-speed production mailing systems. Mr. Perkins was previously Chairman and CEO of Perkins Capital Advisers, Principal at PMK Securities & Research, Inc., Chairman and CEO of Perkins, Smith, Inc., VP of Private Capital Management, and VP of Raymond James & Associates. Mr. Perkins was a member of the Barron’s roundtables alongside some of the greatest investors of all time, including Barton Biggs, Mario Gabelli, Jim Rodgers, Art Samburg, Oscar Shafer, John Neff, and Scott Black. He has been featured in a number of publications, including The Wall Street Journal, New York Times, Forbes, Fortune, and BusinessWeek.

Thank you to Jim Grant for inspiring this interview with his book, Minding Mi$ter Market, in which he wonderfully profiles Marc Perkins.

The Politic: Mr. Perkins, what does somebody who’s never met you before and never read about you need to know?

Marc Perkins: What do they need to know? Hm, that’s an interest question. What do they “need” to know? Interesting way to phrase it. Well, a lot of it depends on their purpose for talking to me. I think any time you’re going to talk to somebody about investments, you need to know their proclivities. Everybody has preconceived notions, and you need to find out what they are before you do anything.

What are your preconceived notions?

That there’s no such thing as “truth.” Let me put it like this… There’s no such thing as an absolute “truth.” Everything changes. And you have to kind of go with the flow! That’s the most important thing. Everybody has preconceived notions, and anybody who tells you they don’t is being silly. You’ve got to start with the preconceived notions and then go from there to being more specific.

What role does that notion play in the market?

My preconceived notion is that history is everything. And long-term history, I hear these kiddies in the market today, and they keep talking about low incurrence, and they go back 10 years. Well, I tuned into the business in 1968, exactly 50 years ago. That’s a little bit of a different perspective.

My reputation was formed by the fact that my first recommendation, as an analyst for the Liberty Mutual Insurance Company, was to sell something. I’m told that’s very unusual. People get into the business and the first thing they want to do is buy something that’s a homerun. I think that’s kind of silly.

In Jim Grant’s Minding Mi$ter Market, there’s that quote where you call out Pennzoil’s bulls—t in public, the oil company once on Mario Gabelli’s “Hall of Shame.”

That’s pretty famous. I actually got my next job because of that quote!

People just say stuff. They say stuff that doesn’t mean anything. You know, I was reading about Merger Masters, that Mario Gabelli (founder, chairman, and CEO of Gabelli Asset Management Company Investors) book he wrote with Kate Welling (editor and publisher of independent investment journal, Welling on Wall St). Kate is, by the way, a very underrated journalist. I think she’s terrific.

You know, I think Mario’s quote was that risk arbitrage is the best way to learn the stock market. Well, I don’t know if I believe that. I don’t think there is a “best” way. I think you just keep an open mind and go where the flow takes you. But you’ve got to have an open mind. You’ve got to believe anything. And people just keep their minds closed!

I came into the business in February of 1968, and everyone was bullish. You just don’t have any idea how bullish the world can get until you’ve lived through the late 60s and early 70s. The world was really nuts.

Why was everyone so bullish?

Because they like company. The main reason why people invest is that they like company, and if everybody else is bullish, they want to be bullish. Not so true on the bearish side. On the bearish side, nobody likes to be bearish. Except me. I don’t like to be anything.

That’s part of the “no preconceived notion thing,” I don’t think you can be bullish all the time, and I don’t think you can be bearish all the time. Although Jim Chanos (president and founder of Kynikos Associates who short-sold Enron before it filed for bankruptcy in 2001) is bearish all the time, and I don’t have anywhere near the money he’s got.

Given that you’re neither a bull nor a bear, was that first suggestion of yours—the unconventional call to sell Mobil at 54 and then more at 60—just a flip-of-the-coin type thing?

No! I’m not a bull by definition, and I’m not a bear by definition. It’s not like “I’m a bear, so I can only short stocks,” or “I’m a bear, so I can only buy stocks!” I think you just have to look at every situation and keep an open mind. I think that most people look at the world through rosy glasses­—rose-colored glasses—and I don’t find that very helpful. I think you’ve got to be honest with yourself. That’s what I try to do—and it’s mostly worked.

What’s the rosiest call you’ve ever made?

I called a friend of mine in about 2009. The market had just been through a terrible time. We had the mess in real estate. I called him up and I said, “Switch everything you can into the stock market. Right now. Today. Because it’s over. The bear market’s over, and it’s over today!”

It worked. It was the most bullish thing I ever said, and the market followed the lead appropriately. Sometimes, you just have to look at what’s going on and take your cue from the market and try not to do anything silly. One of the things I think you have to do is separate knowledge from wisdom.

One of the things I say about Warren Buffet is that Warren’s one of the wisest people I’ve ever met in the stock market, or in the investment business, but not necessarily the smartest.

But I’ll take wise over smart any day.

I had a good friend, now deceased, by the name of Irwin Guttag. He was a guy who ran the New York Stock Exchange (NYSE) Special Surveillance Committee– a tough cop of the NYSE. He was a member of the Exchange, he was a trader, but he was the guy they appointed to be on the lookout for problems.

In 1999 or 2000, I lost a major account. The guy called me up and said, “I want you to know, I’m closing all of my accounts. I was out to dinner the other night, and I met a guy named Bernie Madoff. He had such a compelling story that I decided to give him the money.”

He ended up losing $200 million.

I figured that, when a guy closes a big account, it’s incumbent upon me to check it out. So, I called up two people. One was a guy named Alan Curtis, who had formerly been the head of risk arbitrage at Dillon Read & Co. He lived in Palm Beach.

I said, “Alan, do you know Bernie Madoff?”

He said, “Sure he’s a nice guy.”

I said, “Would you give him money to manage?”

And he says, “Nooo!”

I said, “Why not?”

And he says, “Because at dinner, Madoff explained the strategy that he uses to get these extraordinary returns. I know that strategy—it’s been around for years. If you execute it perfectly—I think it was treasuries earning 2 percent a year—you’re not going to earn the kind of returns he’s talking about.”

So, then I called Irwin Guttag, who’s as wise as it gets.

I said, “Irwin, do you know Mr. Madoff?”

“He’s a nice fella,” he replies.

I said, “Would you give him any money manage to manage?”

And he said, “Nooo!”

I said, “Why not?”

And he says, “Because what he claims to be doing is impossible, and I don’t believe in trying to do the impossible.”

It was that simple. He said, “I don’t need to do any homework. What he’s doing is impossible.” Of course, it turns out that it was more than impossible. [laughing] Mr. Madoff, I think, still sits in jail. The really smart people… I shouldn’t say smart people. The really wise people didn’t give him a nickel. And that’s what you need to do. You need to be wise. You need to look at everything from a wise man’s point of view. You don’t have to be right on every little tidbit.

I don’t know if that makes any sense.

Sure. For simplicity’s sake—looking at the bigger picture?

Yeah, you just need to keep your head down. That’s how I ended up in the manufacturing business. The Chairman of my company is a guy named Bob Spiegel, and Bob was my boss at Salomon Brothers going back to 1971. We’ve been together… In two years, it will be 50 years!

He’s another one of those guys that’s incredibly wise. “But I got a D in accounting,” he likes to say. That doesn’t phase him. He used to put signs up all over Salomon. One was “Better a short profit than a long face.”

That’s where I really learned the business from– working at Salomon Brothers, where all the top people lacked college degrees. In fact, I think Bloomie (aka Michael Bloomberg) was the first guy there, in upper management, who had a college degree! Bloomie went to Hopkins. I read the other day that he’s now worth $60 billion—two-thirds the net worth of Salomon Brothers back when we worked there. You know, he’s done okay for himself.

But you just have to keep your wits about you. I mean, that’s what it really boils down to. That’s it. Just don’t let the conman con you.

I don’t remember if this was in Jim’s book or not, but I was sitting in a meeting one time. It was a corporate finance meeting with a medium-sized investment firm. The way they did these meetings was to have someone from the outside come in and make a pitch. Every week, it was a different pitchman.

A guy came in and was pitching a real estate deal. This particular investment banking firm specialized in financial products. And this guy pitched a real estate deal which I was just about sleeping through.

He said that the deal he was pitching was a “good deal” at some number—it’s not easy to remember a number from 40 years ago. But you’re going to love this! Then, he said it was a “better deal” at a higher number!

I put my newspaper down, “What did you just say?” It was all tax credits. When he got to explaining why it was a better deal at a higher price… At that point, I said, “No wonder why this country is so screwed up!” It was crazy! That’s what we lived through.

And then this business in 2007-2008. When somebody comes into the business today, if I were running a firm and I were hiring people, the first thing I would do is sit them down in front of the TV and make them watch The Big Short at least three times. It’ll make them realize it’s all true! It’s not a comedy. It’s all true!

The guy who invented all that nonsense was my mail clerk at Salomon Brothers. It was Lewis Ranieri! Except he didn’t believe in all the craziness. He just figured out that you could package stuff. The first pass-through security (a pool of fixed-income securities backed by a package of assets) was the Ginnie Mae pass-through, a mortgage-backed security. After the Ginnie Mae pass-through, next came regular pass-throughs. Those were still legitimate instruments.

And then it got nuts. The Big Short is just one of the great pieces about Wall Street ever!

Better than The Wolf of Wall Street?

Ah, The Wolf of Wall Street. I knew all those guys! I used to run William O’Connor’s Christmas party. And they were all nuts, although that was really kind of an exaggeration. But The Big Short—no exaggeration. That was the way it was.

You know, when Michael Lewis wrote his first book, Liar’s Poker, all my friends knew I used to work at Salomon Brothers. They said, “Was it really like that?” I said, “Oh no, that’s very understated!” [laughing] And I started telling some of the stories about Bill Simon, who went on to become Secretary of the Treasury, and who subsequently passed away from what I call “terminal meanness.” Yeah, he was one of the nastiest people I ever met.

But some guys went out to lunch and walked into a practical joke store. And when he got back, he had picked up this urinal, this plastic urinal with suction cups on it so you could stick it on the wall. And Bill Simon got a hold of it and thought it was one of the funniest things ever!

He takes it into Billy Salomon’s office and sticks it on the wall. Billy Salomon comes back from lunch with the French Ambassador and his wife, and there’s a urinal on his office wall. Now, I thought that was pretty funny! Billy Salomon did not think it was funny one bit! [laughter] That’s the kind of stuff that really went on!

That was really in 95. But there’s nothing like… I mean, to be in 2008, how could you believe that shit! When you sit down and think about it, what was going on was an extraordinary business was being developed, which of course collapsed, but… it was being developed by people who were buying mortgage securities without even knowing what they are. And in The Big Short, they interview the airlines stewardess that owns five houses in Miami. And you’ve got to say to yourself, “What the fuck! What’s going on?” [laughter]

Or when Steve Carell meets the guy from Goldman Sachs at a meting in Las Vegas and says to the guy, “How many of these mortgage securities can you put in one package?” And the guy says, “Oh, it’s unlimited!” And Steve Carell turns around, goes back to his team, and says, “Short.” And they said, “Short what?”

“Anything you can borrow.”

You know, when things start coming apart, it’s not difficult to tell. But people are living in such denial that… You know it’s all going to come apart at the seams. You knew it in 1968. You knew it totally in 1968 because it was just nuts, you know?

Any final words?

You have to be sensible. You don’t have to be right. You have to be sensible. That’s it.