From the February 01, 2011 issue of Futures Magazine • Subscribe!

Mark Fisher: A trader returns to his roots

FM: Will natural gas eventually be a currency commodity?

MF: No. Crude oil will be the ultimate currency. The problem with nat gas is that you really can’t store it. If you went out and bought the curve in 2018, 2019 and 2020 and realize the market is completely illiquid out there, if you can stomach the volatility and the markings that probably represents good value at these levels.

FM: If crude can surpass $90 in what is still a pretty soft economy, what will happen when we see a more robust economy?

MF: The price of crude oil is not being driven by strict demand/supply factors, it is being driven by the fact that people are afraid of what the futures holds for all these currencies. It used to be that people were worried about the immediate futures, the next three or six months, but [felt that] in the long-term everything is going to be ok. Not it is just the opposite. Now people say ‘I am sure I can get through the next three or six months but I am worried about where this country is headed in the next four or five years. Am I going to have a job? What is the price of everything going to be?’ I still don’t understand how all these inflation numbers come out at 1% when with everything I buy the inflation rate is probably 15%.


FM: Pickens noted that the United States is no longer the primary demand driver for energy. Do you agree with that? What are the implications?

MF: The implications are simple: We are in a stagnant economy; we are in a stagnant civilization. We are in a regulatory meltdown. The emerging markets and developing nations are eating our lunch and that is going to continue because that is where all the ingenuity is. You can see it in the marketplace. The demand is going to come from all these developing nations that want to raise their per-capita incomes. It is that simple. Do you know what I gave out for a holiday gift to all my clients? A six-volume book of “The Rise and Fall of Ancient Rome.” If you look at the book there are a lot of parallels to what is happening today in the United States.

FM: What do we need to do to prevent that?

MF: We need to run only balanced budgets. We need to [get a handle on] entitlements. We need to fix social security once and for all and do a means test so if your net worth is above X you lose all those benefits. We are going to have to tell people that if you want to work in government and set policy, then you can’t go into private industry and lobby Congress for five years. We need to make simple regulations so people can understand them. We need to incentivize business creation by allowing business people to make the investments instead of papering over everything. To some degree we are going to have to bite the bullet and say everybody is going to have to take a haircut, whether it be China or anybody else, because we printed too much money and can’t afford to pay it all back. As soon as we tell the patient the diagnosis as opposed to just hiding it from him, after the initial shock the market will accept it but the longer we put these things off [the worse it gets]. It is a revolving circus. Everybody has to take a cut. The sooner we bite the bullet the less pain there is going to be; the longer we wait the more pain there is going to be.

The energy market is just one place where you see the bubbles of the world boiling over.

FM: Where will crude oil and natural gas be a year from now?

MF: Crude will probably average — assuming the economy keeps stagnant and the government keeps mucking things up — anywhere between $85 and $110. Nat gas, it is more a point of where the long end of the curve is going to be than where the spot price is; the spot price [depends on weather]. You probably will see the back end of the curve, two or three or four years out, rise 30% this year.

FM: What are you attempting to do on the asset management side?

MF: It is Mark Fisher. It is me taking a very methodical, conservative approach to try and create, using a fundamental bias to adapt and change as market conditions change, and trade in a very low risk tolerance in a highly volatile environment. The idea is not to lose money. If you worry about the downside the upside will take care of itself in most cases.

FM: How much money under management do you have?

MF: Right now I have $130 million. It is all in one basic CTA/RIA program and I hope to raise that to $800 million by the end of 2011. It is futures and equities.

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