Take I dunno, Bitcoin. As you increase the time window, showing a net loss is less and less possible. I'm not a crypto bull and I think it will tend towards zero someday but this is inarguable using current historicals.
The strategy logic is a bit different than the ETF is being rolled out - this one shorts all the tickers he is talking about the most (whether he is bearish or bullish) and hedges with a long position on the market.
Buying inverse funds is a bad idea. They suffer from exponential decay over long time periods.
Consider that the 1x (non-inverse fund) goes up 10% in a day. At the same time the inverse fund, which tracks it, falls 10%. Now consider the following day that the 1x fund falls 9%, to its original price. Consequently, the inverse fund goes back up 9%, but it's about 2% lower than its starting position. So you still lose money even though the original 1x fund is unchanged.
The better strategy is to buy puts or short the non-inverse, 1x version.
they mention it pretty early on in the article. The same firm created both
> An enterprising and clearly meme-savvy fund manager out there, Tuttle Capital Management has actually filed prospectuses for two Cramer-tracking funds:
The Inverse Cramer ETF (SJIM)
The Long Cramer ETF (LJIM)
> In retrospect, I'm not surprised. Tuttle Capital is known for its hilarious yet strangely effective ETF lineup. Case in point, their earlier Short Innovation Daily ETF (SARK) that bet against Cathie Wood and her funds is still up 73% year-to-date.
Ideally, that should net out to an expensive market-neutral fund with 0% expected returns minus the management fees and transaction costs, the latter of which could be really high.
There are actually ETFs that contain themselves (or rather, ETF X is e.g. 10% ETF Y which is 10% ETF X. So long as the total amount of X owned per unit of X is less than 1 (in absolute value), the arithmetic mostly works out. Though I don’t know if any ETFs directly contain themselves.
But at the same time it reminds me of a certain type of World Cup bet, where you win mega $$ if you correctly pick the winners of all 64 matches. But you also win the same mega $$ if every single one of your picks loses, which of course is just as hard to achieve. (I forget how they handle ties but you get the idea.)
All of which is to say, if Jim Cramer has no expertise in picking stocks, investing broadly in his picks is not much different from an index fund, you'll just roughly track the market. Whereas if he actively gets you to consistently and reliably lose money on high-volume publicly traded investments, then that's still (counterintuitively) a signal that somehow he knows something.
and/or his public predictions influence the markets
I'm pretty sure multiple data vendors compete to sell low-latency feeds of his picks, given his popularity.
If a Cramer-tracking ETF underperforms the market, it's entirely possible that the ETF enters the market late (after the market has mostly priced in the Cramer-bump) and holds during the reversion to the mean. Though, I haven't looked into it.
I haven't looked at him very closely, but I'm not sure how to read Jim Cramer.
Just observing his onscreen personality at face value: He's very loud and bold, erratic, yelling ridiculous things at the audience in a Philly accent (no offense to Philly on that ... it just lends itself to a particular stereotype, like he may as well be at a bar talking about the Eagles). When his investments are bad, you can just say oh, the guy is a blowhard, not basing his opinions on keen intellectual insight; it's all entertainment purposes and so on.
But there's another cynical angle that enters, maybe it's paranoid to say but I think it's plausible: Does he have personal stake in his advice? Does he have some connections at these companies telling him to boost the stocks on air? That would enter into the realm of fraud. I guess when people confidently urge others to make ruinous financial decisions, that kind of concern always enters into it.
Not speculating whether Cramer or acquaintances of his have a stake on the stocks or not. But from what I remember from posts on WSB his advice if you'd follow through a) doesn't give very significant changes and b) rather goes in the negative direction. To me it seems it's hard to separate from noise. Of course this might be explained by stating a free money paradox. (If everyone invested...) But also it seems his advice is actually rather random and just fits an entertainment narrative at best or sales pitch at worst.
There was an NLP based trading firm about 10 years ago that would run sentiment analysis over articles from industry analysts. According to someone that worked there, some of the most useful signal came from analysts that had strong negative correlations with future performance.
The "innocent" explanation is that they might be particularly susceptible to "human" biases (e.g. loss aversion) while still extremely knowledgeable about the market, and that they represent a more extreme version of "human" market errors broadly that eventually correct themselves. Which would be a fascinating hypothesis to explore.
While a less innocent explanation is intentional market manipulation, of course.
If anybody knows of research along these lines I'd be extremely curious.
I think it works more like a law of thermodynamics, where no matter how you arrange the elements or what signs you flip, whether you follow his advice or inverse it, any stock betting system based on Jim Cramer is guaranteed to lose money.
He was essentially teaching algo trading, and also tracked wallstreet bets sentiment analysis. He went so far as to pitch his investment strategy to serious tech investors (it was ahead of the nasdaq at the time). His Wallstreet bets tracker had been tanking so he focused on the fish investing fund, but I was waiting for one of the investors to suggest he inverse wallstreet bets and make a lot of money.
Short WSB is a difficult fund to put together. The meme stocks are often very expensive to borrow (partly because lots of other people are in the same trade).
The best way to run a short ETF (on something where no futures market exists) is to also manage the long version of the fund and cap interest in the short fund to be less than or equal to the long. If it's a serious investment it's likely the long fund naturally has more interest anyway.
There are charts from GS or JPM (I can't remember which one) which show the performance of the most shorted stocks in the market. It's a straight line down (something like -7% annualized) and it also underperforms during crashes like 2008, 2020... Even including gamestop and AMC you only see a tiny rally in 2021 but the general line is down. Meaning it is a very effective hedge against the stock market.
The explaination could simply be that mainly only smart money short stocks, and they tend to be pretty good at figuring out issues in companies that are not yet fully priced in.
If I were to run a short ETF, I would add filters such as market cap, short interest and day to covers to avoid liquidity issues and squeezes, and/or play it through options structures. Like, it would have been stupid to be short GME when it had 300% of float as short interest. But it is probably fine in a lot of case with a sufficiently low day-to-covers and short interest. A more active strategy would be to monitor the Fee Rate which gives a good indication of the stock supply and is more "real time" than short interest data which often lags a few days/weeks.
Especially in the world of finance, I don't think you can possibly go on TV, in good faith, and make any recommendation other than "hire and expert" or "invest long term." It's fundamentally too late of someone is telling you about it on TV; could be a great company to invest in but not short term.
The problem I have with #4 is that you're picking a false expert. The word "expert" is supposed to mean something. Experts are usually not the people that do television for a living.
And with #3 above #4, you're essentially considering yourself as the top expert. Those should be flipped, and greater care taken to identify and qualify expertise.
Distinguishing between a false expert vs a true expert is the same problem as picking a good stock vs a bad stock. There have been an unlimited number of studies done on the matter, and the overwhelming consensus is that professional stock pickers as a whole can be beaten by goldfish when it comes to making predictions.
If every investor was buying only index funds, all it takes is one investor to find one stock that has great fundamentals and is undervalued relative to its performance.
They will beat out the other investors on this one pick.
Once someone starts winning and getting a better return the money flocks to them and away from the index funds. That then causes index funds to rebalance, which causes those investors looking for a better return to find other stocks, rinse and repeat.
It will never be the case that everyone is investing only in index funds. It would be so easy to beat out everyone else in that scenario.
> If every single stock investor bought index funds
Well they don't, so why discuss meaningless hypotheticals? Yes this advice doesn't make sense in a world where there are no active funds, no wealth managers, where day trading doesn't exist, hedge funds all shut down, there are no quants, no HFT, no one trading derivatives...but until that happens I'm still telling the average person to buy index funds.
#3 should be the best if you are actually knowledgeable. The problem is a lot of people are basically fooling themselves into being knowledgeable. There is a lot of dumb randomness in stocks but over a longer term stock prices tend to somehow follow underlying economic realities.
But, sadly, the stock market is a merciless test proctor. You may do all the work you think is necessary, you may research until the cows come home and you may still be wrong because you read things that were biased, you did not look at things in the proper perspective, there was some important discovery somewhere that changed the industry, geopolitics, etc.
So even if you are planning on doing your own research you should be well diversified.
Also, do not listen to experts! The stock market is one of the few fields where "experts" will intentionally try to mislead you. Always try to get primary material, or as close to primary material as possible. And do not fool yourself into thinking that reading a bunch of secondary expert articles, or listening to Cramer or other experts is doing research. That's like hoping to become a paleontologist by watching friends.
Until you realize we're entering uncharted territory as the index funds no longer represent external indices but a huge portion of money flows and are becoming feedback loops.
So what? Index funds still ultimately own shares in a diverse portfolio of companies. That's why they were a good idea in the first place, and it's why they are still a good idea.
If your argument is that this feedback loop is distorting the value of the companies index funds invest in, such distortion would impact anyone who buys stock in those companies whether or not they do it through index funds. Therefore, picking and choosing individual stocks doesn't become more attractive even if we know index funds distort the market, unless you only invest in stocks that are not owned by index funds -- good luck with that.
> their earlier Short Innovation Daily ETF (SARK) that bet against Cathie Wood and her funds is still up 73% year-to-date.
Only because this article was written in October of last year. Since then SARK is down 30% (along with the rest of the market).
You can tell that the entire investment services industry is totally fucked up simply by the form of the information they put out. Investment returns calculated over a single time period is a case in point. What you really want to know is the expected value of the return given random entry and exit dates, but no one publishes that information. Another example: investment recommendations are published as buy and sell recommendations, but that is totally wrong. For any stock, there is a price at which it is advantageous to buy it, and a price at which is it advantageous to sell it, and a range in between where you should hold. But no one publishes those price ranges, they just say "buy", "sell" and "hold" as if the price is irrelevant, or on the obviously false assumption that the price when you act on the advice will be more or less the same as the price when they produced the advice. The whole thing is a colossal scam from start to finish.
The fact that he still had a job after his 2008 mistake of insisting that Bear Stearns was fine and a safe place to keep your cash, is astounding. That should've been an unrecoverable mistake, especially with how strongly he was certain.
"Should I be worried about Bear Stearns in terms of liquidity and get my money out of there? No, NO, NO!!!" (Afterwards... 90% loss in the next 6 days.)
His job is to attract viewers. Not to make accurate stock picks. When I watch a comedy show it's because I find it entertaining, not because I actually take advice from comedians.
The comparison to a comedy is a pretty silly one - comedies are pretty explicit about what they are and are pretty clearly not trying to give you financial advice or medical advice or anything like that[0]. Cramer is on a news network and tries to give the appearance of being a financial advice segment, stopping short (likely including the words “this isn’t financial advice” with a little implied wink of).
It’s clear to you and I what Cramer’s deal is, but there are plenty of people out there who take him at face value.
[0] - there’s sometimes product placement or even a little feel-good message about friendship or family, but rarely if ever anything that looks like actionable advice.
This is nothing more than a money grab to the chat groups that made it popular to note in hindsight that Cramer was wrong.
Picking against Cramer is no more different than picking against a random person with random picks, which is like 50/50 except you will pay some ETF fees to do so but you will at least have fun losing money like in casinos
That's the case if Cramer is just an honest guy making his honest picks completely independently, and nobody with any power would even dream of using his platform to do anything untoward, because everyone with any direct or indirect ability to influence him is just so darned honest that they wouldn't dream of exploiting such a large pool of useful reputation.
I don't know why I feel I should point this out. I'm sure it's completely true. Don't even know why it would cross my mind to wonder. The financial world is so honest and full of integrity that it's obvious that this is true.
You mean, hypothetically speaking, that Cramer would be gasp paid to promote specific stocks? Maybe when they are in a dire situation (or when insiders know it's going to be pretty bad pretty soon now™)? Yes, that would be bad.
Whilst I tend to agree with your first point, assuming Cramer's picks are actually of random quality there is still one slight difference if lots of dumb money is picking stocks based on what he says on TV. Time the short right and the stock will be slightly overvalued based on everyone else's expectations because of dumb money inflows...
Since Cramer has a large audience, his picks function as a magnet that aligns the beliefs of some subset of that audience. If the effect is large enough, then trading against that effect can be worthwhile. It's exploiting the same alignment effect as companies that buy order flow from retail investor apps. Retail investors typically do not generally buy large amounts of a single stock over time to get the best price. By buying Robinhood's order flow, Citadel can trade against a counterparty whose behavior is generally known.
The theory behind exploiting the gradient created by alignments caused by factors other than fundamental business performance is better than random.
an inexperienced trader may end up losing money on a trade regardless if they picked the "correct" side because they usually have no exit strategy and they will inevitably screw it up.
The most important parametes of the ETF will be what time delay and how long. I guess that's critical for any ETF, but the market almost always blips in Cramer's direction before reversing (and occasionally not reversing).
Readit News
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...
Including monthly investment doesn't really help, either.[1]
[1]: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...
Take I dunno, Bitcoin. As you increase the time window, showing a net loss is less and less possible. I'm not a crypto bull and I think it will tend towards zero someday but this is inarguable using current historicals.
Include Michael Reeve's Stock Picking Goldfish too.
https://www.quiverquant.com/cramertracker/
The strategy logic is a bit different than the ETF is being rolled out - this one shorts all the tickers he is talking about the most (whether he is bearish or bullish) and hedges with a long position on the market.
Consider that the 1x (non-inverse fund) goes up 10% in a day. At the same time the inverse fund, which tracks it, falls 10%. Now consider the following day that the 1x fund falls 9%, to its original price. Consequently, the inverse fund goes back up 9%, but it's about 2% lower than its starting position. So you still lose money even though the original 1x fund is unchanged.
The better strategy is to buy puts or short the non-inverse, 1x version.
> An enterprising and clearly meme-savvy fund manager out there, Tuttle Capital Management has actually filed prospectuses for two Cramer-tracking funds:
> In retrospect, I'm not surprised. Tuttle Capital is known for its hilarious yet strangely effective ETF lineup. Case in point, their earlier Short Innovation Daily ETF (SARK) that bet against Cathie Wood and her funds is still up 73% year-to-date.Yet another ETF created for gullible meme-driven investors
I'm not saying ARK is good by any means, personally I'm not a fan of Cathie Wood at all. But context is important as well.
That fund is making big future growth bets. No one would go in with 100% of their portfolio on that.
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But at the same time it reminds me of a certain type of World Cup bet, where you win mega $$ if you correctly pick the winners of all 64 matches. But you also win the same mega $$ if every single one of your picks loses, which of course is just as hard to achieve. (I forget how they handle ties but you get the idea.)
All of which is to say, if Jim Cramer has no expertise in picking stocks, investing broadly in his picks is not much different from an index fund, you'll just roughly track the market. Whereas if he actively gets you to consistently and reliably lose money on high-volume publicly traded investments, then that's still (counterintuitively) a signal that somehow he knows something.
and/or his public predictions influence the markets
I'm pretty sure multiple data vendors compete to sell low-latency feeds of his picks, given his popularity.
If a Cramer-tracking ETF underperforms the market, it's entirely possible that the ETF enters the market late (after the market has mostly priced in the Cramer-bump) and holds during the reversion to the mean. Though, I haven't looked into it.
This is not investment advice.
Just observing his onscreen personality at face value: He's very loud and bold, erratic, yelling ridiculous things at the audience in a Philly accent (no offense to Philly on that ... it just lends itself to a particular stereotype, like he may as well be at a bar talking about the Eagles). When his investments are bad, you can just say oh, the guy is a blowhard, not basing his opinions on keen intellectual insight; it's all entertainment purposes and so on.
But there's another cynical angle that enters, maybe it's paranoid to say but I think it's plausible: Does he have personal stake in his advice? Does he have some connections at these companies telling him to boost the stocks on air? That would enter into the realm of fraud. I guess when people confidently urge others to make ruinous financial decisions, that kind of concern always enters into it.
In its performance? No. In the number of eyeballs it attracts? Absolutely. It would make no sense to jeopardise the latter in pursuit of the first.
You don't have any idea why, do you?
The "innocent" explanation is that they might be particularly susceptible to "human" biases (e.g. loss aversion) while still extremely knowledgeable about the market, and that they represent a more extreme version of "human" market errors broadly that eventually correct themselves. Which would be a fascinating hypothesis to explore.
While a less innocent explanation is intentional market manipulation, of course.
If anybody knows of research along these lines I'd be extremely curious.
He was essentially teaching algo trading, and also tracked wallstreet bets sentiment analysis. He went so far as to pitch his investment strategy to serious tech investors (it was ahead of the nasdaq at the time). His Wallstreet bets tracker had been tanking so he focused on the fish investing fund, but I was waiting for one of the investors to suggest he inverse wallstreet bets and make a lot of money.
[1] https://www.npr.org/2021/09/25/1040683057/crypto-trading-ham...
The best way to run a short ETF (on something where no futures market exists) is to also manage the long version of the fund and cap interest in the short fund to be less than or equal to the long. If it's a serious investment it's likely the long fund naturally has more interest anyway.
The explaination could simply be that mainly only smart money short stocks, and they tend to be pretty good at figuring out issues in companies that are not yet fully priced in.
If I were to run a short ETF, I would add filters such as market cap, short interest and day to covers to avoid liquidity issues and squeezes, and/or play it through options structures. Like, it would have been stupid to be short GME when it had 300% of float as short interest. But it is probably fine in a lot of case with a sufficiently low day-to-covers and short interest. A more active strategy would be to monitor the Fee Rate which gives a good indication of the stock supply and is more "real time" than short interest data which often lags a few days/weeks.
1. Buy and hold broad index funds
2. Throw darts at a board to pick individual stocks
3. Be knowledgeable, do your own research, read financial reports, custom build a portfolio
4. Listen to expert advice (Cramer, anti-Cramer and everything else)
0. Get elected to Congress
Especially in the world of finance, I don't think you can possibly go on TV, in good faith, and make any recommendation other than "hire and expert" or "invest long term." It's fundamentally too late of someone is telling you about it on TV; could be a great company to invest in but not short term.
And with #3 above #4, you're essentially considering yourself as the top expert. Those should be flipped, and greater care taken to identify and qualify expertise.
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If every single stock investor bought index funds, investing in stocks would be pointless because it would not reward companies that perform better.
They will beat out the other investors on this one pick.
Once someone starts winning and getting a better return the money flocks to them and away from the index funds. That then causes index funds to rebalance, which causes those investors looking for a better return to find other stocks, rinse and repeat.
It will never be the case that everyone is investing only in index funds. It would be so easy to beat out everyone else in that scenario.
Well they don't, so why discuss meaningless hypotheticals? Yes this advice doesn't make sense in a world where there are no active funds, no wealth managers, where day trading doesn't exist, hedge funds all shut down, there are no quants, no HFT, no one trading derivatives...but until that happens I'm still telling the average person to buy index funds.
But, sadly, the stock market is a merciless test proctor. You may do all the work you think is necessary, you may research until the cows come home and you may still be wrong because you read things that were biased, you did not look at things in the proper perspective, there was some important discovery somewhere that changed the industry, geopolitics, etc.
So even if you are planning on doing your own research you should be well diversified.
Also, do not listen to experts! The stock market is one of the few fields where "experts" will intentionally try to mislead you. Always try to get primary material, or as close to primary material as possible. And do not fool yourself into thinking that reading a bunch of secondary expert articles, or listening to Cramer or other experts is doing research. That's like hoping to become a paleontologist by watching friends.
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Until you realize we're entering uncharted territory as the index funds no longer represent external indices but a huge portion of money flows and are becoming feedback loops.
If your argument is that this feedback loop is distorting the value of the companies index funds invest in, such distortion would impact anyone who buys stock in those companies whether or not they do it through index funds. Therefore, picking and choosing individual stocks doesn't become more attractive even if we know index funds distort the market, unless you only invest in stocks that are not owned by index funds -- good luck with that.
Only because this article was written in October of last year. Since then SARK is down 30% (along with the rest of the market).
You can tell that the entire investment services industry is totally fucked up simply by the form of the information they put out. Investment returns calculated over a single time period is a case in point. What you really want to know is the expected value of the return given random entry and exit dates, but no one publishes that information. Another example: investment recommendations are published as buy and sell recommendations, but that is totally wrong. For any stock, there is a price at which it is advantageous to buy it, and a price at which is it advantageous to sell it, and a range in between where you should hold. But no one publishes those price ranges, they just say "buy", "sell" and "hold" as if the price is irrelevant, or on the obviously false assumption that the price when you act on the advice will be more or less the same as the price when they produced the advice. The whole thing is a colossal scam from start to finish.
"Should I be worried about Bear Stearns in terms of liquidity and get my money out of there? No, NO, NO!!!" (Afterwards... 90% loss in the next 6 days.)
https://www.youtube.com/watch?v=gUkbdjetlY8
It’s clear to you and I what Cramer’s deal is, but there are plenty of people out there who take him at face value.
[0] - there’s sometimes product placement or even a little feel-good message about friendship or family, but rarely if ever anything that looks like actionable advice.
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Picking against Cramer is no more different than picking against a random person with random picks, which is like 50/50 except you will pay some ETF fees to do so but you will at least have fun losing money like in casinos
I don't know why I feel I should point this out. I'm sure it's completely true. Don't even know why it would cross my mind to wonder. The financial world is so honest and full of integrity that it's obvious that this is true.
The theory behind exploiting the gradient created by alignments caused by factors other than fundamental business performance is better than random.
on some cases it can actually be way worse.
an inexperienced trader may end up losing money on a trade regardless if they picked the "correct" side because they usually have no exit strategy and they will inevitably screw it up.