When Jim Cramer blamed “a group of complete morons” for the recent market downturn, he didn’t necessarily call out short-vol traders by name, but it certainly isn’t difficult to read between the lines: Cramer has also recently called XIV a “phony product” as well as a “toxic cigarette for the market.” Sure, it’s easy to call an exchange-traded product “toxic” and “phony” after it’s down 90%, but where were Cramer’s cautionary tirades in 2017, when XIV and SVXY nearly doubled in price? As usual, Cramer’s version of a downgrade is a lagging indicator, about as helpful as the bells, whistles, and flashing graphics on his television program.
I guess I must be one of Cramer’s “morons” because I’ve bought and sold XIV a number of times. I was fully aware of the risks and the 80% drawdown “acceleration event” trigger explained in the fund’s prospectus. I didn’t put any capital at risk that I wasn’t prepared to lose. I knew that being nimble was the key with XIV: get in, get out, take profits where you can, and avoid holding beyond the closing bell if possible. And, I did pretty well for a moron, netting thousands of dollars with my XIV trades.
Perhaps Cramer wasn’t speaking directly to me, but indirectly to those who invested in XIV or SVXY recklessly, excessively, or greedily. Even in that case, I would say that “morons” is a harsh and inaccurate word. Those who misused short-vol products and got caught in a massive drawdown are already suffering enough; the last thing they need now is an insult from a celebrity whose investing results are themselves questionable.
I’m not mad at the Mad Money host, just a little surprised to see him take his off-the-rails persona to an ugly new level. Perhaps a face-to-face debate with a successful short-vol trader would restore a measure of humility to Mr. Cramer. Until that happens (and I’m not holding my breath), I can take solace in the fact that I’ve been called out by a bona fide celebrity as a proud, card-carrying member of the Moronic Short-Vol Club.
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