ETFs are derivative financial products that among other things also allow people to speculate on the movements of certain indices. One such index could be the so-called “Inverse Cramer,” to the point that someone decided to apply to the SEC to be able to issue the Inverse Cramer ETF (SJIM).
The ETF to bet against Jim Cramer’s recommendations
Jim Cramer is the famous TV host of CNBC’s Mad Money program, watched daily by hundreds of thousands of viewers, but lately he has become famous for something else to his detriment.
In fact, Cramer usually makes predictions, yet for some time now many have turned out to be completely wrong.
By now there are so many of his wrong predictions that there are even those who consider him a good indicator of what the market will not do.
In other words, there are those who believe that most of the times Cramer spreads a prediction, the market ends up doing the opposite.
There are no firm statistics on the percentage of his predictions that have turned out to be the exact opposite of reality, but online especially, there is now a kind of myth that doing the opposite of what he suggests will yield good results.
Famous for example was his suggestion to buy Coinbase shares in August 2021 when their price was $248. Cramer at the time claimed that that was a cheap price, but aside from the subsequent spike in October and November 2021, thereafter their value plummeted to the current $73.
Also famous were his numerous wrong predictions about Bitcoin’s price. For example, in June 2021 he revealed that he had sold almost all of his Bitcoin after China’s ban against crypto mining. At the time, Bitcoin’s price was around $35,000, while only four months later it had risen above $60,000.
For this reason, there are those who came up with the idea of creating an ETF based on an inverse index to its forecast, namely precisely the so-called Inverse Cramer.
Finally happened: Cramer ETFs
20-25 equal-weighted stocks/ETFs based on Cramer's Twitter & TV recommendations and market views. Positions exited if Cramer has no view & once profit targets met.https://t.co/ZvA5G2zoTX pic.twitter.com/tY9yBMt15s
— ETF Hearsay by Henry Jim (@ETFhearsay) October 5, 2022
Tuttle Capital Management submits new ETF to the SEC
The company that has applied to the SEC to be able to issue this ETF is Tuttle Capital Management, based in Connecticut, which has submitted to the SEC preliminary prospectuses for the short Inverse Cramer ETF (SJIM) and the long ETF called Long Cramer ETF (LJIM).
These are portfolio-based ETFs built on the recommendations Cramer publishes on Twitter or TV. Specifically, the short ETF allows people to bet against his recommendations, while the long ETF will be based on a portfolio built with trades contrary to those suggested by Cramer.
These portfolios will consist only of equities, and will have the explicit goal of providing investment results that are approximately the opposite of Jim Cramer’s recommended investment results.
Tuttle Capital Management’s idea might sound like a joke, but the official application filed with the SEC makes it immediately clear that it is serious instead.
It is enough to mention that in August, Capital78 co-founder Algod wrote on Twitter that he had doubled his investment capital ($50,000) simply by doing the reverse of what Cramer suggested.
Officially doubled the inverse @jimcramer account, for those who are not aware i started the account with 50k
honestly mind blowing how wrong one man can be pic.twitter.com/mH3DhEdJFs
— Algod(τ, τ) (@AlgodTrading) August 22, 2022
In theory, inverse ETFs should be used to hedge against losses from investments that turn out to be wrong, but they can also be used, as in this and other cases, to bet against a particular strategy.
For example, Tuttle Capital Management in late 2021 had launched another inverse ETF, called Turtle Capital Short Innovation ETF (SARK), to bet against Cathie Wood’s ARK Innovation ETF (ARKK). Now, since its launch on 9 November, 2021 SARK is up 83.1% so far.
Although there is no guarantee that SJIM and LJIM will enable similar results, Cramer’s reputation as a bad guesser might attract many speculators to try betting against his directions using these two simple ETFs.