Polarizing stock picker and Mad Money host Jim Cramer has finally gotten his own set of ETFs!
Investing aficionados who do follow the show hosted by Cramer have a love-or-hate relationship with the anchor on his antics and decisions.
Tuttle Capital Management has rolled out 2 sets of ETFs to track Cramer’s picks – an Inverse Cramer (aka) short Cramer ETF and a long Cramer ETF.
But of course, the spotlight generally falls on the Inverse Cramer ETF, since those who follow the show long enough would have famously remembered his bullish bet on Bear Stearns.
Who is Jim Cramer?
You may or may have not heard about Jim Cramer, so here’s a quick introduction.
Jim Cramer is a successful TV anchor (yes he is!) of the famous finance television Mad Money program by CNBC.
Mad Money’s first airing was way back on the 14th of March, 2005. So having a show that went on for close to 20 years is no simple feat.
However, Cramer has had his own fair share of right picks and wrong picks.
Coupled with witty catchphrases, Jim has successfully garnered enough attention for his shows.
Jim Cramer Inverse (& Long) ETFs
For the past many years, investors have been skeptical of Cramer’s stock pick, and some wished that they could actually bet against him.
If you’re one of them, well…
Unless you really despise Cramer’s picks and will go all the way to short whatever he says buy and buy whatever he says sell, it involves a tantamount amount of time, energy, and effort.
Not to mention, even if you had all the time in the world to go head-on against everything Cramer says, how much should you buy and sell?
Well, now you do have an option. Tuttle Capital Management has rolled out 2 ETFs, one that goes in the opposite direction of whatever Cramer suggests, and one that goes as per what Cramer suggests.
They are the Inverse Cramer (SJIM) and Long Cramer (LJIM) ETFs.
You can find the prospectus here.
So should you really invest?
I wouldn’t invest in the Inverse Cramer ETF
I am against it. Let me tell you why just by showing you the key points, extracted from the prospectus.
1. Fees are not cheap
Nothing in this world is free. If you outsource the tracking of Cramer’s buy-sell decision and want to go against his calls, well you gotta pay for someone to track Cramer.
The fund’s total annual operating expenses after fee waiver or expense reimbursements total up to 1.2%.
It is not exactly exorbitant due to the frequency the funds need to rotate certain stocks in and out, but compared to other passive or index-tracking ETFs, which can be as low as 0.50% per annum, 1.2% is not exactly cheap.
2. Management risk
There is a risk that an investment technique used by the Fund’s portfolio manager to take the opposite view of Cramer’s recommendations may fail to produce the intended result or meet the Fund’s investment objective.
If Cramer is absent from CNBC or Twitter for a prolonged period of time for any reason, including, without limitation, illness, personal leave, business or reputation disputes, or is unexpectedly incapacitated, the fund manager would not be able to take any next course of action.
This could leave ETF holders in precarious positions with no safety mechanism from the fund manager’s intelligence to mitigate any action plans.
3. Portfolio turnover risks
Since the fund may buy and sell stocks actively based on Cramer’s advice, it will definitely incur higher transaction costs. This includes higher brokerage commissions and may increase the number of capital gains (in particular, short-term gains) realized by the Fund.
Shareholders may also need to pay tax on such capital gains.
So even if you do successfully profit by betting against Cramer, you need to still profit enough to not only pay a capital gain tax and still outperform the market.
4. Correlation risk
Tuttle Capital did take the effort to create an Inverse Cramer ETF to track and go against all of Cramer’s advice.
But they did mention there will be no absolute guarantee that it is able to achieve a high degree of inverse correlation with Cramer’s recommendations.
The main source of Cramer’s advice will be taken from Cramer’s recommendations on Twitter or his television programs on CNBC.
Tracking all of his advice from both sources, and even choosing a suitable vehicle, stock, and or other instruments to go against Cramer does not guarantee an absolute inverse correlation.
In the end, it boils down to absolute faith that Tuttle Capital can only do what it can within its means to decipher and construct something with a certain degree of inverse correlations to Cramer.
Your investment end goals?
When it comes to consuming investment content, I categorize them into 2 categories.
One category provides me with insights and information to analyze and make an informed decision.
Another category, which sometimes provides me information, but mostly serves for pure entertainment purposes.
Cramer’s show and tweets fall under the second category. I enjoy the banter of poking fun when he screws up, but I certainly do not want to be putting aside money to bet against Cramer.
Nor to bet me on getting rich with that!
I rather enjoy the Inverse Cramer ETF as another form of investing entertainment, which does not require me to pay a monthly subscription, and will be free whenever they report their results.
But that’s just me. Do you really hate Cramer so much that you wouldn’t mind putting where your money is at?
Even if the Inverse Cramer ETF might not deliver what it sought to do?
Let me know in the comments!