I’ve got no position, but listened to their multi-hour Q&A from their recent conference call (available on their website) and found their discussion of residential related risk controls and their overall financial health pretty convincing. That’s not to say that if Cramer et al. manage to convince their customers that they are going out of business because of losses that it can’t hurt their business enough to become self fulfilling.

I think that there is some worry out there about the balance sheets of the insurance companies now that even the AAA paper is starting to appear to be risky. Based on what David has written here previously, that shouldn’t be much of an issue, so should be some good opportunities for portfolio upgrading through the end of the year.

1) they would advocate mental trailing stops or possibly conditional orders rather than actual stop orders;

2) often when an individual stock has fallen by X% their thesis on that individual stock has ipso facto not worked out;

3) the larger technical thesis is that the dynamic distribution of returns around certain chart setups is long tailed rather than Brownian, so they hope a good decision strategy with stops has an expected value exceeding market drift by some amount in excess of transaction cost, slippage, and excess taxation; clearly the validity of the idea depends on empirical details; if leverage amount is considered as a decision variable which changes with the setup, it makes things a little more interesting.

I agree. I use both mental stops, levels at which I reevaluate to see if my thesis is incorrect, and hard stops, stop orders that I have placed. I generally use hard stops for shorter term trades and for riskier stocks, and mental stops for stocks that I intend to hold for the longer term. It’s a hodgepodge, but flexibility can be valuable as you mentioned.