One thing is certain about the celebrity stock market pundit Jim Cramer: He can excite investors, in both bad and good ways.
It is often said that a person could spend years making no mistakes without notice, but once that person makes a misstep, the spotlight manages to show up right on cue. Now, it doesn't help when you're on television on a Friday literally shouting about how Bear Stearns at $10 is the buy of the century only to have it open at $2 the following Monday. To be clear, Cramer has made some good calls over the years, but I refer you to my earlier point about the spotlight and when it tends to shows up. Also, don't forget, Cramer, a former hedge fund manager, was the founder of this very publication.
What started as a gag of sorts on social media, prompted the folks at Tuttle Capital Management to fire up Microsoft Excel (another running gag/truth about how dependent the industry is on this piece of software) and run some numbers on Jim's picks. The results presumably had a correlation that veered toward the negative end of that scale, because they filed for the Inverse Cramer Tracker ETF (SJIM) , a few months ago. At the same time, they also filed for the Long Cramer Tracker ETF (LJIM) , if only because, as the New York State lottery slogan goes, "Hey, you never know."
Expenses
March 2 saw both of these funds start trading on the Chicago Board Options Exchange. While the management fees are stated at 95 basis points (bps), there are acquired fund fees of 25 bps and an estimate of additional fees of 26 bps as well bringing the total fund expense ratio to 146 basis points (1.46%). The issuer has instituted a 26 bps expense waiver/reimbursement until June 30, 2024, so, until that time, shareholders will see a 120 bps expense ratio and a shareholder with $1,000 invested over a calendar year would pay $12.00 in fees over that period.
Let's turn to the prospectus to see how this particular sausage gets made.
SJIM, LJIM
Both of these funds' 20 - 50 name security selection process is dictated solely by "Cramer's stock selection and overall market recommendations throughout the trading day as publicly announced on Twitter or his television programs broadcast on CNBC." Equities, American Depository Receipts, ETFs, and inverse ETFs are fair game when trying to establish the appropriate position for Jim's recommendations. One interesting note: The prospectus spells out that the portfolio manager "has discretion to not transact in equity securities mentioned by Cramer" if he feels there are operational issues that would arise from holding the name, or, if the portfolio manager feels that "Cramer's statement about any given security" doesn't rise to the level of being "an investment recommendation."
With the "buy" discipline established, let's take a look at the "Sell" rationale. If Jim changes his tune and recommends a name currently held in the SJIM portfolio, it will be sold. If a name falls off Jim's radar in either fund it will be sold. Falling off Jim's radar includes periods when he may be away on vacation from CNBC or taking a Twitter break. The funds state they intend to "hold positions no longer than a 5-day trading week but could hold a position longer" depending on how long Jim maintains his opinion.
Aside from following Jim's recommendations, LJIM differs from SJIM in that it has the ability to take advantage of what might be considered the "Cramer Bump" or the observed effect on share price moves based solely on Jim's discussion of a company.
Wrap It Up
Considering that it costs about $225,000 a year to run an ETF, not including any marketing expense, you'd have to figure that the folks at Tuttle have some firm conviction that these two funds will bring out both the fans and haters of Mr. Cramer. All I know is that as fired up as Jim can get, at times he does live up to his "Jimmy Chill" nickname, and being a good sport about the launch of these funds is proof of that.
