Building the Inverse Jim Cramer Index | Hacker News Reader

Building the Inverse Jim Cramer Index

quantbase.medium.com

60 pointsvampiretooth133 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."

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.

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

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.

>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.

We can't charge performance-based fees as much as we'd like to with mass retail clients, according to the SEC[0]. Not charging except when a client portfolio beats a benchmark or profits counts too. AUM fees are considered by the SEC to be the best way to align incentives between advisors and clients.

Furthermore, up to this point, we've been completely free for current clients to ensure we're providing value before charging anything.

At the same time, we charge a fraction of the fees vs other "high-performance" oriented managed alternatives: Grayscale at 2%, Titan at 1%, typical hedge fund 2/20, etc

We're VC-backed, SEC-registered, our goal at the end of the day here isn't a quick cash grab, it's to be a long-standing, sustainable, valuable experience for clients in a space (high risk investing) that currently lacks exactly those things.

(and by the way: an AUM fee is just about the slowest way one could "cash grab", decades-old robo-advisors are barely profitable with it. It's not a high-margin business at all).

[0]: https://www.sec.gov/rules/other/2021/ia-5733.pdf

So...still false.

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

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...

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

When you say, paid actor, are you proposing that Cramer is being paid by some fund to pump a stock that they already have a position in? I don't know, but I believe it'd be highly unlikely given that he had a pretty good career as a fund manager himself, probably doesn't need more money.

The article mentions (or links somewhere to this info) that there's no longer a Cramer pump, although there definitely was a couple years back

> probably doesn't need more money.

What's he doing on TV all the time then?

Having fun? What are rich founders doing that are still at the helm of their own company, what are rich fund managers doing that have already proven their merit?

Mostly making money because they don't know what else to do? Does anyone actually enjoy doing a ~daily tv show? Seems like a lot of work.

Well it takes a certain type of person...and I guess he's that person. I'm sure he likes the attention.

He probably also likes money. In my experience "has money" doesn't equal "can't be corrupt", to tie this back up a few levels in the thread.

WallStreetBets had something that was like a fish in a fishtank somehow directing stock purchases, versus WSB, and WSB lost.

It was a YouTuber, possibly inspired by a 2012 stunt

[1] https://www.youtube.com/watch?v=USKD3vPD6ZA

[2] https://www.forbes.com/sites/rickferri/2012/12/20/any-monkey...

OP's linked site Quantbase shows a WallStreetBets tracking portfolio with detailed performance history: https://www.getquantbase.com/details?fund=r/WallStreetBets%2...

> 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.

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.

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.

>done quite well since its inception last year.

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

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.

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.

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

The Hofstadter crash of 2023.

The moon explodes.

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!

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.

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

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?

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.

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