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With the imminent launch of a dedicated Inverse Cramer ETF (SJIM) by Tuttle Capital Management, we expect that heretofore eternal fount of market-beating returns – where all you had to do was simply flip the stock recommendations of the CNBC host Jim Cramer – to come to an end. This is because the ETF will finally hold Cramer accountable for his recommendations in a systematic manner, forcing the CNBC host to become more circumspect in his stock picks. But more importantly, flipping Cramer’s recommendations has become just too mainstream to generate any alpha. It is for this reason that the idea of an Inverse WallStreetBets ETF is taking hold now.
For the uninitiated, WallStreetBets (WSB) is a Reddit forum where participants share investment and trading ideas. The forum will always be known for precipitating the meme stock mania back in early 2021 when GameStop, along with a couple of other highly shorted stocks, registered eye-popping gains as the retail investors converged on an imminent short squeeze thesis. Since then, however, WSB recommendations have largely floundered in a challenging macroeconomic climate, thus prompting a few fellow investors to call for an Inverse WallStreetBets ETF (check out this post as well as this one).
So, is there any utility in flipping the top stock picks on the WallStreetBets forum? The snippet above details the trending tickers on the Reddit forum over the past 30 days.
Quiver Quantitative’s WallStreetBets Top 10 (v2) strategy currently has a 30-day return of -16.29 percent. For reference, the benchmark S&P 500 index is currently down 3.50 percent over the past month. Similarly, QuiverQuant’s WallStreetBets Momentum strategy is down 9.13 percent over the past 30 days. Clearly, there is a potential for generating alpha by flipping the recommendations on the WallStreetBets forum. And the rationale for such a strategy is quite simple: WSB recommendations represent the consensus view, which rarely outperforms the market.
Why inverse WSB ETF looks good on paper but is difficult in practice?
Even wsb-ers are considering inverse wsb strategies and thus often flatten specific sentiment
Plenty of such comments:
"Always. And I mean always. Always inverse WSB. Always." https://t.co/dNXjINEyHB
— Breakout Point (@BreakoutPoint) October 20, 2022
Nonetheless, readers should note that the outperformance window for an Inverse WallStreetBets ETF might well be limited as the idea of flipping the forum’s recommendations is gaining traction. Regardless, we are not the ones to look a gift horse in the mouth, and so, as long as there is an opportunity to extract alpha from this strategy, someone should look into registering an Inverse WallStreetBets ETF with the SEC.