Benzinga's Exclusive Interview With MB Wealth's Matthew Bradbard

Matthew Bradbard is the founder of the commodities brokerage firm MB Wealth. He was nice enough to grant Benzinga.com an exclusive interview. MB Wealth is a full service commodities brokerage firm located in Ft. Lauderdale, Florida. MB Wealth together with their Chicago affiliate PFGBEST offer supreme clearing and execution services with 24-hour worldwide trading capabilities. They give their customers the advantage of strong trader support services, a variety of account plans, and a range of trading tools. We spoke with Matt about the unique aspects of the futures markets, his background, how he generates trading ideas, the indicators he uses, and his favorite positions right now.

 

 

Q: For people not familiar with MB Wealth, can you please give us the background on the company and your background as well?

A: I have been in the commodities business since I graduated from Northeastern University about 10 years ago. I worked at a couple of small boutique firms previously, and Lori Bembanaste (Matt's partner) and I decided about four years ago that we wanted to open our own commodities firm. All we do is trade futures and options on commodities. What we try to do is educate and empower the retail investor. We do a lot of research, and they can trade through our firm. We have a relationship with a broker/dealer(PFG) and we also have relationships with about 100 different managed futures funds as well. We have some clients that trade through our clearing firm, PFG, that trade their own account similar to a discount account like E*Trade or TD Ameritrade, except for futures. They just use our clearing firm's platform. We also have clients that seek our advice and recommendations. I am the head trader at MB Wealth and I write a daily blog and a weekly commentary and give clients some research as well. For example, if a client wants to be long oil or soybeans, we will give them 5 different ways to do it, depending on the client's account size and their risk tolerance.

 

Q: Why do you focus on futures?

A: We are a commodity firm. We have a niche business, and all we do is trade futures and commodity options. I don't want to replace an investor's stock portfolio with a commodity portfolio. I think that investors should have a portion of their money in stocks, bonds, real estate, etc. and depending upon their age, net worth and risk tolerance, we think that investors should have anywhere from 5%-20% of their assets in commodities.

Q: Can you briefly explain futures for some of our listeners who may be more familiar with stocks?

  A: Futures trade on different exchanges, but they are all government regulated exchanges. Most of the markets that I trade are U.S. markets in New York and Chicago. What makes futures a lot different than stocks is leverage, which certainly is a double edged sword. When you trade commodity futures and options on futures contracts, you are putting up, on most commodities, 2%-5% of the total contract value. So with that being said, you don't need to see a major move in the underlying commodity to make or lose money. Because of the leverage involved, you can make a lot of money and lose a lot of money relatively quickly. For this reason, you don't want to have all of your money in commodities and you should either be working with a professional or educate yourself in these markets because small fluctuations in the price of the underlying asset can cause significant volatility in your portfolio.

Q: How are futures similar and different than commodity and currency ETFs?

A: The primary difference is the leverage aspect. If you buy some of these double and triple leveraged ETFs, they are more similar to the futures markets. A standard commodity or currency ETF that does not utilize leverage, however, will be less volatile.

Q: Where do you get most of your ideas?

  A: Great question. I am glued in front of screens all day. I am looking at charts, technical overbought/oversold levels, looking at what has happened seasonally in a certain commodity, what has happened in year's past in a certain commodity, and we talk to traders. We have traders on the floor that don't work for MB Wealth, but may manage their own book or may work for another company. I want to talk to grain traders, metals traders, and energy traders that are on the floor. I find a great resource as well, talking to farmers who are out in the fields. The USDA may come out and say something, but if I can talk to a farmer that has a couple of thousand acres, I am more interested in what he has to say than the USDA. I have been doing this for ten years, and I have built up some good contacts.

Q: What are some of your essential market indicators?

A: I want to see the flow of money. We look at volume flows, you know, if their is a big volume spike or if open interest is growing. There is a report that comes out every week that is public information, called the Commitment of Traders report, which gives us an idea of what the institutions and commercials are doing. I am also a big proponent of technical analysis. I look at volume, stochastics, fibonacci levels, moving averages - we use a combination of all of these indicators. I do also have a small fundamental weighting, but I would say that we are relying on 60%-70% technicals to make trading decisions.

Q: Are you worried about the bond market?

A: I trade the bond market. I am not as concerned about the bond market as I am concerned about the effect of interest rates moving higher. That will certainly effect the bond market, but I am more concerned about the short end of the yield curve versus the long end of the curve. Its a big position with a lot of traders being short the bond market. Depending on your timing it may have been good to you. But it hasn't really done anything in terms of bond futures, we have been sideways in about a 6 to 8 handle trading range for the last year. What I am concerned about is on the short end of the yield curve of the Eurodollar. I do think that in Q3 or Q4 of 2010 we will see a rate hike. We have started to position our clients short in the Eurodollar.

Q: Why do you like Corn (One of MB Wealth's biggest positions)?

A: We are going to have a big crop. The projection is to have roughly 89 million acres of corn planted domestically this year, which is up about 3% from last year. The problem that we foresee in talking to some of our customers such as farmers that hedge and speculate with us is the demand may in fact out pace that, so we need to find an additional couple of million more acres. So that being said, this is more of a long term hold. We are buying December new crop corn that hasn't even been planted yet, with the expectation of it moving higher in the next couple of months.

Q: Where can our users read your newsletter? How can they sign up to read more about what you covered today?

  A: You can go to our website: MBWealth.com. There, you can find the Daily MB Wealth Comodity Wrap. MBWealth.com will also let you sign up for a free trial of our exclusive Market Commentary. You can also google MB Wealth to find content that we post via Benzinga and a variety of other outlets.

 

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If you are interested in finding out more about MB Wealth, please visit MBWealth.com. On the site you can request a free trial of the firm's weekly commentary. MB Wealth also has a free daily blog which covers the futures markets. Successful investors have been diversifying their portfolios with positions in commodities and other futures for years. MB Wealth is a terrific resource for learning more about the diversification and hedging benefits of the global futures markets.

This interview is also available as Episode 4 of Benzinga's Podcast

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.