Need some protection against Jim Cramer? Going by the SEC filing that landed Wednesday night, it may soon be possible.
Tuttle Capital Management has filed to launch two exchange-traded funds that trade in the CNBC personality and Alphaville reader’s stock tips, one going long and one going short. The tickers discussed are LJIM and SJIM.
The concept is similar to Tuttle’s inverse-ARK ETF, which is now a $343 million fund that has gained 56 percent this year by betting against Cathie Wood’s flagship investment vehicle.
It’s a running joke that Jim Cramer should have his own inverse ETF. (In our estimation, it rivals a “Long Paul Pelosi ETF” as the most discussed fantasy launch.). But while ARK reveals its positions every day, Cramer’s detection method owes more to stream-of-consciousness. This means high traffic and constant monitoring.
Tuttle’s filing does not determine operating expenses, nor does it determine whether the viewing task Crazy money it will be human powered or automated. Here’s what he says about how the inverse ETF would work:
The Fund is an actively managed exchange-traded fund that seeks to achieve its investment objective by engaging in transactions designed to achieve the opposite of the investment returns recommended by television personality Jim Cramer (“Cramer”). Under normal circumstances, at least 80% of the Fund’s investments are invested in the opposite of the securities mentioned by Cramer.
The Fund’s Adviser monitors Cramer’s stock selection and general market recommendations throughout the trading day, as publicly announced on Twitter or his CNBC broadcast television programs, and sells those recommendations short or enters into derivative transactions as futures, options or swaps that produce a negative correlation. to those recommendations.
The fund goes long in stocks or ETFs that represent sectors where Cramer is negative. The fund uses index ETFs and inverse index ETFs to get the opposite side of Cramer’s stated market view. The Fund’s portfolio generally consists of 20 to 25 equally weighted securities of each market capitalization of domestic and foreign issuers.
If Cramer does not have a view on any of the securities in the Fund’s portfolio, the adviser retains the freedom to sell the positions after profit or loss targets are met, or market conditions such as large swings in either direction require a sale and replacement of them with securities that meet the Fund’s initial portfolio criteria. Under normal circumstances, the Fund will hold positions for no more than a week, but may hold positions longer if Cramer continues to have an adverse opinion.
The Adviser has discretion not to transact in the equity securities referred to by Cramer or engage in related transactions if such securities or transactions are (i) not suitable for ETFs, (ii) have a level excessive risk, (ii) illiquid, or (iv) adversely affecting the Fund’s ability to meet the diversification requirements of the IRS and the Investment Company Act of 1940. In addition, the Adviser has the discretion to determine whether the statements of Cramer’s recommendation regarding any particular equity security is in fact an investment recommendation and therefore ineligible for inclusion in the Fund’s portfolio.
Due to the Fund’s investment strategy, it is expected that the Fund will have a high turnover rate.
This catch-all approach to Cramer benefits from simplicity, but may not capture all of his variables.
For example, a 2021 study of Cramer’s predictive powers over the previous 15 years found that “its accuracy may be limited to positive and buy recommendations” and that “the featured segment of show stocks appears to have the highest accuracy high of recommendations for both positive and negative recommendations.”
Also important is the problem of rational agents – that is, stocks will go up or down based on whether investors think they will go up or down based on whether Cramer said they will go up or down. Behavioral finance matters because Cramer’s quantification has been a surprisingly active subject of research.
A 2011 paper found that Cramer’s influence on stock prices was short-lived, at least for buy recommendations, and that the portfolio’s outperformance was overly dependent on “beta exposure, smaller stocks, growth-oriented stocks and the effects of the moment”. His findings echo a 2009 study that concluded: “While Cramer may be entertaining and fascinating to many of his viewers, his total or average stock recommendations are neither extremely good nor extremely good. bad.” Meanwhile, media studies faculty have sought to understand whether Cramer’s credibility as a stock picker was permanently damaged by Jon Stewart’s infamous jam.
These findings can be considered an argument in favor of active stock picking, in a way that Cramer’s multi-decade television career has not.
