Inverse Cramer ETF (SJIM) – Bet Against Jim’s Stock Picking Advice
Jim Cramer’s stock picking advice has historically been pretty terrible. Now you may be able to make money betting against that advice with the inverse Cramer ETF.
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Jim Cramer is the loud and obnoxious TV personality yelling at you to buy or sell specific stocks while pressing buttons to generate cheesy and annoying sound effects on CNBC’s Mad Money segment. He’s probably one of the most widely known stock pickers out there.
Before yelling on TV, Cramer made millions for decades as a hedge fund manager. Before that, he was an investment banker at Goldman Sachs in the 1980s. By all appearances and some brief Googling into his history, Cramer may seem like a reliable source of financial advice to the average person. He even has a CNBC Investing Club where you can pay him $400/year to “every move Jim and his team make.” (Hint: Don’t do that.)
Ironically, he’s probably more famous among investing circles for being mocked for his antics and bad takes. Cramer’s advice over virtually any time period is one of the greatest examples of how stock picking doesn’t work and tends to underperform the market, so much so that researchers have published papers on the long term underperformance of Cramer’s picks and there’s even an entire Twitter account – that has amassed nearly 200,000 followers in a little over a year – dedicated to doing the precise opposite of whatever Cramer suggests. Until recently, inverse Cramer was largely just a meme on Twitter and Reddit.
In October 2022, Tuttle Capital Management took that idea one step further and made it a reality by filing for an Inverse Cramer ETF. If approved, it will aim to provide the opposite return of Cramer’s recommended trades. The proposed ticker is SJIM, ostensibly for “short Jim.” They also simultaneously filed for a “long Jim” ETF that would be LJIM, but I’m guessing the former will be more popular.
The SEC proposal states the principal investment strategy for the inverse Cramer ETF is as follows:
“The Fund is an actively managed exchange traded fund that seeks to achieve its investment objective by engaging in transactions designed to perform the opposite of the return of the investments recommended by television personality Jim Cramer (“Cramer”). Under normal circumstances, at least 80% of the Fund’s investments is invested in the inverse of securities mentioned by Cramer.
The Fund’s adviser monitors Cramer’s stock selection and overall market recommendations throughout the trading day as publicly announced on Twitter or his television programs broadcast on CNBC, and sells those recommendations short or enters into derivatives transactions such as futures, options or swaps that produce a negative correlation to those recommendations. The Fund goes long on stocks or ETFs that represent sectors that Cramer is negative on. The Fund uses Index ETFs and inverse Index ETFs to take the opposite side of Cramer’s announced market view. The Fund’s portfolio is comprised generally of 20 to 25 equally weighted equity securities of any market capitalization of domestic and foreign issuers. If Cramer does not take any view on any of the securities in the Fund’s portfolio, the adviser retains discretion to sell positions once profit or loss targets are met, or market conditions such as large swings in either direction necessitate a sale and replace them with securities that meet the criteria of the Fund’s initial portfolio. Under normal circumstances, the Fund will hold positions no longer than a week but could hold position longer if Cramer continues to have a contrary opinion.
The adviser has discretion to not transact in equity securities mentioned by Cramer or engage in related transactions if such securities or transactions are (i) not well suited for ETFs, (ii) have an excessive level of risk, (ii) illiquid, or (iv) negatively impacting the Fund’s ability to meet IRS and Investment Company Act of 1940 diversification requirements. In addition, the adviser has discretion to determine whether Cramer’s statements about any given equity security is in fact an investment recommendation and thus ineligible for inclusion in the Fund’s portfolio.”
In a nutshell, Tuttle advisors will monitor Jim Cramer’s recommendations throughout the day and do the opposite of those recommendations via outright short selling or by using derivatives like futures, options, or swaps to generate an inverse position to Cramer’s stock picks. If Cramer says he’s bullish on a stock or fund, fund managers will take a short position, and if he says he’s bearish, fund managers will take a long position.
You may recognize the Tuttle name because they’re the folks who brought you SARK, the inverse ARK ETF that saw an 82% return for 2022. Ironically, Cramer himself praised Cathie Wood, the head of ARK, in 2021 when her flagship fund ARKK fell 23%.
While an inverse Cramer ETF may sound like a wild idea, consider this stat from Babbl: In January 2023, “over the past 6 months, if you bought Jim’s picks on the day he mentioned them & sold two weeks later each time (the opposite goes for bearish picks) on a $1000 principle investment, you would now have $165.90.” That’s a return of -83%.
At the very least, these new funds would provide an easy way to track the performance of Cramer’s picks, as no security currently exists to do so.
Investing should be boring. The takeaway here is probably that long or short Cramer should likely both just be mediums for fun and entertainment, not financial advice, and that if you take any action on Cramer’s picks, you may be better off doing precisely the opposite of whatever he suggests.
In any case, any money you put into strategies like these – either long or short – should be a small amount of fun money that you are willing to lose. Also note that an inverse Cramer ETF would be actively managed, very complex, expensive, and tax-inefficient (due to significant turnover), as most long-short alternative funds are.
Maybe next we can get an inverse ETF for WallStreeBets picks.
What do you think of the idea of an inverse Cramer ETF? Let me know in the comments.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.