Shorting CNBC's Jim Cramer

A new ETF will give investors the opportunity to bet against the controversial TV personality.

Tuttle is at it again. Nearly a year after launching an ETF that bets against Cathie Wood’s ARK Innovation ETF (ARKK), Tuttle Capital Management filed to launch a new fund that will bet against CNBC’s controversial host Jim Cramer.

The Inverse Cramer ETF (SJIM), along with the Long Cramer ETF (LJIM), will base their holdings on what Cramer says on CNBC and Twitter. But there’s little doubt that, should they come to market, SJIM will be the more popular of the two funds.

Target of Scorn

Ever since launching his “Mad Money” show on CNBC in 2005, Cramer has been a target of scorn. Known for making dozens of calls per day and switching his views just as fast, Cramer is seen as an unserious figure by a lot of the investment community.

He is known to have made big calls that ended up being disasters. Perhaps the most famous of those was in 2008, when Cramer told a Mad Money viewer that Bear Stearns was fine and urged them not to take their money out of the stock just days before it collapsed.

More recently, he recommended many high-valuation-high-growth stocks at their peaks in 2021, soon before the growth stock bubble burst.

All of this has spawned the idea that betting against Cramer might actually be a profitable strategy. While many attempts have been made to create inverse-Cramer strategies, the sheer number of calls he makes and the speed at which he shifts gears makes it difficult to come up with a repeatable blueprint for betting against him.

The proposed ETF, SJIM, hopes to mitigate the difficulties by using active management. In a recent Twitter spaces interview, Matthew Tuttle, CEO and CIO of Tuttle Capital Management, stressed that he and his team would use a lot of discretion when deciding what to go long and what to short based on the things that Cramer says.

“You can't do an index-based ETF on this. We've got the flexibility where if he comes out in the morning and says ‘I love this market,’ we can buy SPY [SPDR S&P 500 ETF Trust] and then if he comes in the afternoon and says, ‘I hate this market,’ then we can cover the short and go long. We'll be able to go wherever he takes us,” Tuttle said.

According to the ETF’s prospectus, SJIM’s portfolio will generally consist of 20 to 25 equally-weighted equity securities of any market capitalization, while “under normal circumstances” it will hold positions for no longer than a week.

A Lot of Discretion 

While sure to be an interesting product that garners a lot of attention, whether an ETF that bets against the stock market predictions of a single individual can truly deliver value to investors remains to be seen. Especially when those “calls” are so cavalierly made and with such high frequency.

Sure, the AXS Short Innovation Daily ETF (SARK), which Tuttle sold to AXS Investments earlier this year, is effectively a bet against Cathie Wood. But ARKK is a long-only ETF, making SARK a short-only ETF.

The holdings of ARKK are also clearly laid out each day, so no discretion is needed to create an inverse version of the ETF.

On the other hand, Cramer makes both bullish and bearish calls, which means that SJIM will be a long/short fund. And perhaps complicating matters the most, Cramer makes a lot of calls, so deciding which ones to bet against, and then when to close those inverse bets, will take a good deal of discretion on the part of Tuttle.

Matthew Tuttle explained that people on his team will have to monitor CNBC and Twitter throughout the day to listen for new calls and updates from Cramer. Yet, even after hearing what Cramer says, they will have to decide how much conviction he has in any particular call—a process that will likely be very subjective.

In other words, SJIM is as much a bet on Tuttle as it is a bet against Cramer.

Importantly, Matthew Tuttle also emphasized that the ETF will have a strong focus on Cramer’s latest calls.

“If he mentioned 20 things today, those are the names I want to be in. I don't want to be in the names he mentioned yesterday,” he said.

This has two implications; one, the fund will do a lot of short-term trading, and two, the market has to quickly move against Cramer for those trades to be profitable. If Cramer’s call is wrong over a longer period of time—say a month or a year—SJIM wouldn’t benefit.  

One thing is for sure, SJIM will be unlike any other ETF, and for Matthew Tuttle, that’s a virtue.

“It’s an uncorrelated asset class,” he said. “You can hold on to for a long period of time.”

Performance

Given how ubiquitous he is, finding historical performance data on Cramer’s calls is surprisingly difficult. A study published in The Journal of Retirement in 2018 analyzed the performance of Cramer’s Action Alerts PLUS portfolio (now his charitable trust) from 2001 through 2017.

According to that study, in the period analyzed, Cramer’s picks underperformed the S&P 500 with an annualized return of 4.1% versus 7.1%.

However, that portfolio only contains a fraction of the stocks that Cramer recommends and is more long-term-oriented compared to his other picks.

“I've never come across a data source [where they] watched CNBC every day from 8:30am to 4:00pm and compiled all these calls. And I don't even think you could because [how do you determine] when [he exited a position]?” Matthew Tuttle remarked.

“But I think anecdotally, we all know there have been some just horrific calls. I'd be willing to guess that the stuff that comes out of his mouth during the day is a lot worse than [what he has in his charitable trust].

Cramer Says ‘Bring It On’

If all goes according to plan, SJIM could be trading in the next few months. In his remarks, Matthew Tuttle sounded confident that the SEC wouldn’t get in the way of the ETF coming to market and that they wouldn’t have a problem with the ETF’s name either.

He sounded slightly more concerned that either Cramer himself or his employer CNBC could push back on the fund, but based on tweets that Cramer made on Friday, the Mad Money host seemed to welcome the fund.

ETFs Based On Personalities

While quite different than SARK, SJIM adds to the growing trend of launching inverse ETFs based on popular personalities. Matthew Tuttle left open the possibility of launching more funds that bet against other people with large followings.

“If there is somebody on CNBC or FOX or wherever who's got a following and what they're saying is asinine, then, yeah, we may create it,” he said.

That is, unless, the world ends before Tuttle gets the chance. Responding to a tongue-in-cheek question about what would happen if Cramer became bullish on the ETF which bets against him, Matthew Tuttle said:

“The universe would probably implode. I'm also wondering what happens if ARKK decides to go 100% in in one of the Cramer funds. My brain is exploding as we speak just thinking about the ramifications of that; we'd probably rip a hole in the universe somewhere.”