Philip Fischer can actually say he did the math when it came to his career in the municipal bond market.
And he’s still doing it. Fischer has worked in finance for almost three decades, and most of that time has been spent in munis.
But Fischer was raised as a chemical engineer, and he’s never managed to get engineering and a love of mathematics out of his system.
To this day, writing numbers-heavy modeling programs and converting arithmetical concepts into a functioning reality remain more than just passing interests to him.
His current role is a case in point. As a managing principal at eBooleant Consulting, Fischer tackles mathematical programming for institutions.
Work of that sort traces its roots back to some of his earliest experience with munis, such as when he assisted two professors at the University of Oregon in the late 1970s who were writing computer programs that evaluated the bidding processes of municipal bonds.
His career trajectory in public finance brought him to Merrill Lynch, where he ascended to the head of municipal bond research.
It continues today at eBooleant, which he started shortly after retiring from Bank of America Merrill Lynch in 2010, and with the release of his book, “Investing in Municipal Bonds: How to Balance Risk and Reward for Success in Today’s Bond Market” in January.
But Fischer’s education and path to working in the muni arena emerged from a fluency in numbers and a growing interest in finance.
During his undergraduate studies at Oregon State University, from where he would earn his bachelor of science in chemical engineering, Fischer would take math classes whenever he needed to boost his GPA.
After graduation, he worked as a chemical engineer and economic planner for Mobil Oil in Los Angeles for about a half dozen years before the company sent him to Loyola Law School for his J.D. There, ironically, Fischer developed a strong interest in finance.
To explore it, he returned to his home state to earn a Ph.D. and an MBA in finance at the University of Oregon in the late 1970s. “It was probably a little too much education,” Fischer said, “but I enjoyed it.”
His concurrent research on muni bond-bidding processes with professors there laid the foundation for later work in the industry. Following his studies, Fischer taught economics, investments and finance at the State University of New York, Albany.
“They had a fine muni bond program,” he said. “I really wanted to learn.”
While teaching at SUNY, he spent time consulting with banks in New York. And as he found this interested him more than teaching, he left for Wall Street.
“I enjoyed it thoroughly,” he said of his muni research. “I was an engineer, and this stuff, the way we treated it, was highly mathematical and very rigorous.”
By the mid-1980s, Fischer worked for Citicorp in New York, doing financial, regulatory and policy analysis in fixed-income instruments. He also served as director of the bank’s municipal analysis unit.
Soon thereafter, Fischer found his way to Merrill Lynch in Los Angeles and San Francisco.
There, he covered everything that went through the office, handling a steady flow of work in futures, options, mortgages and corporates, as well as the newly created international equities desk.
“It was anything and everything,” Fischer said. “I used to call my job Battlefield Finance. If you want to learn finance, I mean really want to learn it, there’s really no other way.”
In the early 1990s, Fischer returned to New York to focus on municipal bonds for Merrill’s institutional, and later retail, clients.
“I was put in research,” he said, “and very shortly after that, in 1994, I was asked to develop the risk management and hedging system for the division.”
Merrill soon made Fischer the head of the global index system and head of municipal bond research, with strategy and credit.
When the financial crisis arrived in 2008, the turmoil and Merrill’s subsequent merger with Bank of America brought challenges and opportunities for Fischer over the coming years. Integrating the two firms’ municipal operations proved a complex undertaking, he said.
But the head of municipal markets at Merrill Lynch “did a great job and kept all the troops together, and kept the business going,” Fischer said. “And we merged with the Bank of America muni group, and it was quite congenial.”
Still, by 2010, Fischer was ready to head in a different direction. By that point, there was a lot to do in the muni group, and the work was busy and exciting. But he also realized that if he were ever going to launch his own consultancy — something he’d always wanted to do — this was the time to do it.
“We had a lot going on,” Fischer said. “But it was also for me personally the right kind of situation. I had whatever background or credentials I needed by that point; I knew enough people. So, it was my decision and I think it all worked out very well.”
After stepping down from his role at Bank of America Merrill Lynch, Fischer worked on three projects: consulting, writing a book and travel.
He and a friend, and now general counsel, John Sprung, founded eBooleant — a name derived from an area of mathematics that deals with symbolic logic called Boolean algebra, as well as a reference to their enthusiasm for the venture.
The firm began doing mathematical programming for various projects for institutions while writing numerous white papers.
Fischer and his wife also spent time traversing the globe, reaching every continent except Australia. The two drove 3,000 miles around Europe, spent a month in the Balkans, visited Russia, hit various spots in South America and survived a harrowing journey to Antarctica on an icebreaker.
“I enjoyed the trip, but don’t do it if you get seasick,” he said. “You go through the Drake Passage for almost two days, and it’s something. The water is literally boiling. And waves are breaking across the bow, 30-foot waves, 40-foot waves.”
Back at eBooleant, though, Fischer sees a muni market very much in transition, and one comparable mostly to the over-the-counter equities market during its transition to an electronic market.
The muni market is in the middle of a technological revolution it cannot avoid, he added.
Electronic platforms of all types are sprouting up, providing the information base needed for the market’s metamorphosis.
The Municipal Securities Rulemaking Board’s online EMMA platform is very important, according to Fischer. Reporting for market activity will get ever faster.
“And that will be good for the market as a whole,” Fischer said. “Electronic platforms and electronic models, algorithms of various sorts … there are more than you know. This is math modeling; these are very fancy models, not for the faint of heart.”
Retail participants won’t be using these electronic platforms at first, Fischer noted. However, they will certainly benefit from them.
Like the market, eBooleant is changing. Because client projects have been very large and involved, Fischer has kept eBooleant relatively small; it will eventually grow into something much bigger.
“I kept the consulting fairly broad as opportunities developed,” he said. “Looking ahead, we plan on focusing on a few areas and growing.”
In addition to eBooleant and travelling, “Investing in Municipal Bonds” also absorbed significant amounts of Fischer’s waking hours. The book needed to be written because, in his words, “Very clearly, muni analysts — and by this I mean all of the professionals — need to be very proactive about explaining the nature and function of the muni market” to investors.
As municipals represents the other sovereign market in the United States and finance the majority of the nation’s capital structures, he added, it is vital to inform investors about the governmental nature of the market and give them some confidence that they’re buying instruments that are going to be fairly priced and are going to repay.
“We saw [recently] a number of analysts who are not well-versed in the municipal market make some really astounding predictions about the risk in the market,” Fischer said.
“Investors concerned about default risk needed to be told that, given the infrequency of defaults in the municipal market, such concerns are ill-placed. The studies by the ratings agencies indicating that their bonds rarely default are right — they rarely default,” he said.
This is the time when investors need to understand the nature of the market and understand that the predictions that they are hearing are not reasonable.”
Fischer said he set out to write a book that he wishes he had read when he first learned the business. To that end, he began with a short history of the muni market to provide some orientation to the securities.
He then walks the reader through the first pages of a general obligation bond and explains how to read an official statement.
The book then discusses how the market trades, as well as how state and local governments use the debt — where the money comes from to repay it, and where it goes.
He then moves on to portfolio design.
“A lot of people talk about muni bonds, and bonds generally, and don’t really understand their structure,” Fischer said. “I talk about the term structure, why it’s upward-sloping. But the idea is for the individual to understand that volatility in bonds isn’t what it is in stocks or other securities.”
For the last chapter, Fischer got authority from the Financial Industry Regulatory Authority to use its checklist for muni bond buyers.
If he’s covered the topics well, Fischer said, his readers should be able to go down FINRA’s checklist and understand what they are talking about and ensure the investments they’re buying cover those areas.
In short, Fischer said he wants his readers to decide whether he really knows the business, and that he’s properly done the math.