Mark Fisher is one of those unique characters that only can be found in the futures industry. He became a successful trader on the New York Commodity Exchange (Comex) floor while still at the University of Pennsylvania Wharton School of Business 30 years ago. He went on to launch MBF Clearing, one of the largest energy-based futures commission merchants (FCMs) and the 39th largest FCM in 2010 based on customer segregated funds. He also runs a proprietary trading shop and has spent his entire career educating traders on his method of trading. As part of his education efforts, Fisher long has administered an internship program bringing young people from various backgrounds to MBF to learn about markets, one of his many philanthropic pursuits.
He also has been involved in product development, including designing an ETF that mitigates the roll effect of a long-only commodity index, which has a patent pending. More recently, Fisher has launched a commodity trading advisor (CTA)/registered investment advisor product (RIA). Mark’s brain works a little faster than most and he usually is tackling the next issue before you can digest the first, but we attempt to get his take on his recent pursuits and the energy markets.
Futures Magazine: Mark, you started out as one of the youngest floor traders at the Comex and went on to build one of the largest energy focused futures commission merchants (FCMs) and proprietary trading shops. Tell us what you are up to now.
Mark Fisher: I have been trading for myself for over 30 years. With the markets going electronic I spend more of my time concentrating on trading my own account so I started trading a lot of very liquid instruments, mostly futures, some equities and then opened it up to various friends and acquaintances via managed accounts in September of ’09. I did it for the same reason I became an FCM. I became an FCM because I was the largest floor trader and it made more sense to clear the trades myself. I figured to open it up to close friends. My active trading strategy is basically taking my pattern recognition and risk management expertise built up over the years in commodities and taking a fundamental view, combining that with the technical research that we do and try to create alpha that is not based on stock market results.
FM: In a sense have you come full circle because you started off as a trader, then built a large clearing firm and now are going back to trading?
MF: It is a CTA and it also is a RIA. The trades don’t even clear MBF for complete Chinese wall reasons. You are right, we have come full circle. When I began I was just trading for myself. Now, I am spending most of my time on this active management strategy.
FM: There has been a strong belief in many corners that speculators in general and long-only commodity funds specifically are distorting the price of oil. Where do you stand on this?
MF: That is rubbish. Basically if you look at the [commodities] that don’t trade on futures markets – coal, iron ore, uranium and those with a limited market like rubber, LNG (liquefied natural gas) or rice – they went up just as much as those [commodities] that trade on active futures markets. People who believe that will believe anything. You can blame the governments themselves because of all this quantitative easing and printing money will end up someplace. So the money went into commodities. Because commodity markets are so much smaller than the equity and debt markets, it is a huge tidal wave that gets reflected in price. So I don’t think you can blame speculators. You should blame the printing presses, not the speculators.
FM: Is the price of crude oil misaligned with the fundamentals?
MF: No. It depends on how you define fundamentals. People are looking for a store of value. It depends on what China is doing. They are buying every energy asset available whether it investing $1 billion in Nigeria or in Western Canada, whatever they can do. People recognize that crude oil is a store of value and crude oil, more than gold, is the ultimate currency. You see that more and more. The fundamentals are [not] just the physical supply and demand; crude oil is taking over as a store of value whereas 20 years ago that was not true.
FM: How has quantitative easing affected the price of crude oil?
MF: When you have the emperors that have no clothes on sitting there printing and printing, whether that is the right policy or not, the money has to go someplace. You always have unintended consequences. What you think is going to happen doesn’t necessarily happen. Obviously quantitative easing saved the banks and saved Wall Street, but at the same time a lot of this money is falling to commodities, especially in the energy and agricultural sectors because those things are necessities, even more so than precious metals. China is trying to go to a protein-based society. Do you know how much grain that takes? Where is it going to come from?