(BFM Bourse) – On Wall Street everything is possible. An investment fund has just submitted a request to the American stock market policeman for the launch of a very specific product. It offers investors to bet against the convictions of Jim Cramer, the star host of the American channel CNBC’s “Mad Money” program, often mocked for his recommendations.
It all started as a joke, until a management company took it seriously and brought it to life. On Wednesday last week, Matthew Tuttle, the boss and chief investment officer of Tuttle Capital Management, filed a prospectus with the American stock market policeman, the Securities & Exchange Commission (SEC), for the launch of a very particular ETF.
From its little name Inverse Cramer ETF (SJIM), this product will allow investors to bet against the stock recommendations of Jim Cramer, the star host of the CNBC specialty channel’s “Mad Money” show.
“The fund manager is going to be mindful of stock selection as well as Cramer’s overall recommendations, as publicly announced on Twitter or on his CNBC broadcasts, and will sell those recommendations short or enter into commodity transactions. derivatives such as futures, options or swaps that are negatively correlated with these recommendations” is it mentioned in the prospectus filed with the SEC.
The Jim Cramer case
Jim Cramer can be defined as a colorful character in the American audiovisual landscape. Aged 67, this Harvard graduate, ex-broker at Goldman Sachs and ex-manager of hedge funds, has become a same mocked for his recommendations which regularly fall by the wayside. The criticisms against him and his show are not new. Joseph Nocera, economic columnist at New York Timeswrote already in 2006: “People who watch Mad Money and follow Cramer’s advice are fools.”
The Jim Cramer case has even become a very serious subject of research in behavioral finance, points out the Financial Times. A research paper “How Mad Is Mad Money? Jim Cramer as a Stock Picker and Portfolio Manager” published in 2012 found that Cramer’s influence on stock prices was short-lived, at least when it came to buy recommendations, and that portfolio outperformance was too dependent on “beta exposure, small actions, growth-oriented actions and momentum effects”.
These findings echoed a 2009 study titled “Investing in Mad Money: price and style effectswhich concluded, “While Cramer may be entertaining and mesmerizing to many of his viewers, his overall or average stock recommendations are neither extraordinarily good nor exceptionally bad.”
Another move from Tuttle Capital Management
A handsome player, Tuttle also filed a prospectus for a fund called Long Cramer ETF (LIJM). This will invest in stocks recommended by Jim Cramer. Pro-Cramers can easily follow the suggestions of their favorite cathodic guru.
Tuttle Capital Management is also known for having already marketed an “anti-Cathie Wood ETF” called Tuttle Capital Short Innovation ETF (SARK). Launched in November 2021, SARK bets against ETF Ark Innovation, Cathie Wood’s flagship fund invested in disruptive technology companies. For the record, this is the first ETF in the United States to bet against another ETF. And for now, the “anti-Cathie Wood” ETF is making its subscribers happy. The ETF SARK (for Short Ark) has gained almost 60% since the beginning of the year, while the fund of the high priestess of “tech” has lost as much in the same interval.
Sabrina Sadgui – ©2022 BFM Bourse