Building the Inverse Jim Cramer Index

Building the Inverse Jim Cramer Index(quantbase.medium.com)

60 points by vampiretooth1 4 years ago | 33 comments

So, they tried a whole bunch of things, and even with the benefit of that lookforward bias, their final strategy still underperformed the S&P? Color me unimpressed.

Edit: I looked at their site and it's clear that their business model is just to gather assets to charge fees on. Which is why they've developed strategies like Inverse Cramer, Pelosi Tracker, WallStreetBets -- these strategies don't have any alpha, they're just designed to catch the eye of retail traders.

Also this scumbaggery, from their website:

"$70M+ Assets Committed*"

Then way at the bottom:

"* = "Assets committed" refers to captured user behavior in attempted investments and not to assets being actively managed."

vampiretooth1 4 years ago | |

I'd familiarize myself with overfitting (https://www.investopedia.com/terms/o/overfitting.asp). That's optimizing your portfolio to historical data so much so that it is no longer generalizable to the future.

ProjectArcturis 4 years ago | | |

I'm well aware of overfitting, but it seems that these folks are not.

faangiq 4 years ago | |

No dude. Zoomlennials are disrupting the market with their apps and TikTok ads. Because.

tstewart314 4 years ago | |

Hey! One of the founders here. We're a recently launched roboadvisor explicitly for "high risk investing" and we develop these portfolios to make it easy to take advantage of more exotic strategies for those without the financial or technical knowledge to do it themselves (while providing tons of data, transparency, and recommendations). This blog post is a fun strategy poking fun at the recent popularity of "Inversing Cramer" and our own spin on it. Note that this isn't a live portfolio on our site.

For these more fun ones (WallStreetBets, Nancy Pelosi) - these are specifically requested from our clients and we provide extensive data and recommendations to suggest portfolios to clients based on their situation. You can see for yourself: the WallStreetBets portfolio is down nearly 40%. Nancy Pelosi is flat - we don't hide that at all and instead make it very clear with large font. Our most popular strategy (pulls the most AUM) is the Quantbase Leverage Flagship, a portfolio based on this paper[0] with nearly 100 years of performance history.

Yes we charge a fee on AUM. All robo-advisors do. This aligns incentives: we make (more) money only when you do. We're not for everyone, and even for those we are for we recommend on our front page to limit investment to a fraction of your total portfolio, but the thesis we believe in is solid: you can improve your absolute returns by taking a higher level of risk. We make it easier to do that intelligently, with proper data, and with the proper risk management. Happy to answer any other questions.

[0]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2741701

Edit: added "more" to clarify the AUM fee incentives alignment.

ProjectArcturis 4 years ago | | |

>Yes we charge a fee on AUM. All robo-advisors do. This aligns incentives: we make money only when you do.

This is absolutely false. You charge a 0.94% management fee. That fee gets paid whether or not customers' portfolios go up.

calderwoodra 4 years ago |

Is there any reason to believe that Jim Cramer (or the inverse of Jim Cramer) would do particularly well in the stock market?

I imagine following a cat picking random stocks works about as well. https://www.npr.org/sections/money/2013/01/14/169326326/hous...

HWR_14 4 years ago | |

> Is there any reason to believe that Jim Cramer (or the inverse of Jim Cramer) would do particularly well in the stock market?

Jim Cramer, before he was on TV, did well beating the market as a fund manager. So there is a good reason to believe he could. Whether he could televise his strategy to retail investors and funds looking to profit from retail investors and make his viewers money is a different question.

jjeaff 4 years ago | | |

He beat the market according to him, with no evidence to back it up. Multiple analysis of his stock picks that I have seen have all found his picks to underperform the market.

cuteboy19 4 years ago | |

Inversing a pump and dump operation, provided it is well timed, can easily beat the market. Assuming that Cramer is a paid actor, this could probably be the case here

pavlov 4 years ago |

For taking a position against another growth stock hype luminary, there exists an inverse Cathie Wood index you can trade: an ETF with the ticker SARK (“short ARK”). It has done quite well since its inception last year.

dominotw 4 years ago | |

>done quite well since its inception last year.

that probably doesnt say much though. what happens if its run since ark's inception?

dehrmann 4 years ago | | |

This is also a problematic metric because of survivorship bias and as part of that, most investors showed up late to the game. Despite the fund having done well, it still could have a negative return over its life when weighted by AUM.

pavlov 4 years ago | | |

A short fund like this is a trading instrument. I don’t imagine anyone holds it for years.

The fund makes its money on fees, not on price appreciation.

robonerd 4 years ago |

But what happens when Jim Cramer starts promoting the Inverse Jim Cramer Index?

marginalia_nu 4 years ago | |

The Hofstadter crash of 2023.

SomeBoolshit 4 years ago | |

The moon explodes.

chii 4 years ago |

The idea of an inverse cramer index assumes that cramer is always telling the "wrong" thing - that is, his predictions are inversely correlated with the truth (or outcome).

That's not what cramer's predictions are though - his predictions are likely not far off from a random flip of the coin. So an inverse is likely to perform just as well (or poorly) as the real prediction!

kjs3 4 years ago | |

I'd always assumed his trader-buffoon shtick was to push the proles to trade a particular way so that his trader buddies could profit from the herd. But coin toss is probably as accurate and more charitable.

leobg 4 years ago |

My tongue-in-cheek heuristic for the last couple of years has actually been the Inverse Gates Index.

tjs8rj 4 years ago |

Very interesting and Quantbase looks neat (as well as the other investing strategies you link to: Pelosi Tracker, leveraged long run investing, etc).

Is there a case for this as an actual investment or primarily novelty?

myvoiceismypass 4 years ago | |

I am running into website issues galore with quantbase today and it is turning me off.

Like: window alert usage for "logging", pages rendering the following as text "Application error: a client-side exception has occurred (see the browser console for more information)."

General session wonkiness.

Lovely console errors: "Uncaught (in promise) SyntaxError: JSON.parse: unexpected character at line 2 column 1 of the JSON data"

Seems neat, though, I don't see why or how I should trust them with bank account access.