• News Ticker alerts

Stock of controversial Bridgepoint Education is up 20.94% in early trading today (July 11) as its Ashford University, which accounts for almost all of company revenue, was given accreditation by the Western Association of Schools and Colleges. The threat of non-accreditation from two different bodies has been hanging over the stock. Although its returns have been slumping of late, along with those of other for-profit schools, Bridgepoint is still extremely profitable and has a strong balance sheet. Its stock lagged because inability to get accreditation could have killed the company, which has come under withering criticism for, among many things, spending much more on marketing than on education. At one point the stock was up 27% today.

The overall market is also soaring, as Federal Reserve Chairman Ben Bernanke yesterday told a group of economists that the Fed is in no hurry to raise interest rates. Banks are paying almost nothing for short-term money, and the Fed has been artificially driving down long rates through its purchases of long-term paper, a program known as quantitative easing, or QE. Yesterday's statement would appear to open the gates to another huge market rally. The long term concern, of course, is that since early 2009, stocks have been riding on easy money around the world -- not on economic performance. In the U.S., stocks have more than doubled -- by a lot -- and they have also soared in other major economies as a result of a coordinated central bank liquidity gusher, while the world economies have stumbled. (Full disclosure: I am still buying blue chip stocks with high yields. The monetary gusher should continue to support equities, although I cannot criticize those who believe there will be a crash.)

  • News Ticker alerts

Comments

Don Bauder July 11, 2013 @ 1:28 p.m.

STOCKS ZOOM TO ALL-TIME HIGH ON BERNANKE COMMENTS. The Dow Jones Industrial Average today rose 170.10, up 1.1%, as the market rejoiced at Federal Reserve Chairman Ben Bernanke's comment yesterday that the Fed will continue to keep interest rates extremely low -- in effect, printing money prodigiously. The 15,461.76 level of today's closing is an all-time record for the Dow. The Standard & Poor's 500 did even better, jumping 1.4% to 1,675.09, also an all-time record.

San Diego's Bridgepoint Education, which received accreditation, zoomed 26.33% to $15.93. As I have discussed in previous columns, Bridgepoint generally has a high short position -- that is, a large percentage of investors are betting the stock will go down. When the company gets good news, as it did today, the shorts run to cover, or buy the stock they have borrowed, pushing the shares up. But short-covering was probably a small part of the story today. The accreditation lifted a potential death sentence from the company.

0

Sign in to comment

Join our
newsletter list

Enter to win $25 at Broken Yolk Cafe

Each newsletter subscription
means another chance to win!

Close