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ITT Educational Services Inc. Message Board

thedeathrace 123 posts  |  Last Activity: 3 hours ago Member since: Jan 10, 2013
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  • Reply to

    HERE'S THE REASON FOR THE LOW PPS OF CLIFFS

    by solarmanmike Oct 2, 2014 12:25 PM
    thedeathrace thedeathrace Oct 2, 2014 2:28 PM Flag

    What are you talking about? It does not matter on what venue shares are sold or shorted (shares shorted are sold). If someone sells, then there has to be a buyer.

  • Reply to

    HERE'S THE REASON FOR THE LOW PPS OF CLIFFS

    by solarmanmike Oct 2, 2014 12:25 PM
    thedeathrace thedeathrace Oct 2, 2014 1:07 PM Flag

    Well, I would say that the number of shares you post is interesting. I suspect that many of the people who bought those shares you show then sold them out with ongoing stop losses. So, 31 million shares liquidated (out of a total share count of 150 million plus another 50 million shares shorted). However, I can not give you any credit for enlightening up with the fact that there has been more selling initiated transactions than buying initiated ones (for every seller there is a buyer). Not a surprise. I think that the other consideration is that many mutual funds are on September or October fiscal year ends. These funds do not want to show that they own CLF in the fiscal year end statements. Why take the heat from investors. So they just sell regardless of price.

  • Reply to

    PEAKs Program

    by thedeathrace Oct 2, 2014 11:05 AM
    thedeathrace thedeathrace Oct 2, 2014 12:51 PM Flag

    I was not involved in it at all. I just read all the old 10Qs and 10Ks. Things were tough in 2007-2009. You couldnt get a loan for anything. ESI's mistake was thinking that these people would repay their loans. But that also means that they needed to be able to get jobs. But hte job market was awful for years and is still tough. Unemployment is down but this is a result of so many people dropping out of the workforce. Regardless, ESI blew it in my opinion as they did not keep some of that PEAK generated tuition money in a rainy day reserve. It would have saved a ton of aggravation for everyone, except the short sellers. LOL.

  • thedeathrace by thedeathrace Oct 2, 2014 11:05 AM Flag

    I have looked at this PEAKs program stuff, but not in exhaustive detail. I would say the following. The PEAKs program was insituted in 2009, after the financial crisis when no one (not even homeowners) were able to borrow a dime for anything. I tried to refi my mortgage in 2008-2009 and it took 18 months because of all the bank baloney. Students were unable to borrow while the unemployment rate had skyrocketed and people wanted to get retrained for new jobs. Seems like a long time ago and people probably dont even remember how tough it was. So ESI developed the PEAKs program to find some method of helping students get financing. ESI could have loaned the students the money themselves, but they had traditionally not done that and there are some complex rules about how to do that. But to get the PEAKs program lenders on board, ESI had to offer guarantees. ESI went with it and these guarantees have been disclosed in the financial notes right from the start. Where it looks like ESI failed is that they clearly underestimated the default rate as the job markets did not recover much. They also failed inthat they did not take a portion of the PEAKs money that went to tuitions (ESI revenues) and set aside a portion (lets say $125 million) in case their default calculations were wrong and some of the guarantees would have to be paid. Instead, ESI used the PEAKs money to buy back shares. ESI should have bought back $800 million in shares in 2010-2012, instead of the +$ 900 million in shares that were repurchased. It is also interesting that I see that the shorts had a large position in the share well before the PEAKs programs were ever put in place. I remember seeing in 2008 on the CNBC Live early morning show one short seller (Chanos) say on that he had been short ESI for 5 years and it was by far the worst short he had ever made. The mishandling of the PEAKs funding came well after the shorts had gotten involved with ESI.

  • Reply to

    It is the Media!

    by w999surf Oct 2, 2014 7:28 AM
    thedeathrace thedeathrace Oct 2, 2014 10:18 AM Flag

    I disagree. You do not need any PR firm or TV press. You need good management and we will see what Casa has brought to the table. Warren Buffett moved to Omaha so he wouldnt have to listen to this type of PR spin and garbage and also to all the junk that short sellers put out there. He doesnt and shouldnt care, and nor should the longs. If you think CLF has long term value, will be around in for another 150 years, then buy more at these prices. How often do you get in a week or two a 25% off for sale sign. If you are driven by short term price action, then I suggest doing something different with your time and money.

  • thedeathrace thedeathrace Oct 2, 2014 10:00 AM Flag

    I think that skittle12345 brings up an interesting discussion point. That is the point of CLF's debt level. The implication he makes is one of looming bankruptcy or some for of massive dilution (which is effect almost a like a bankruptcy as existing shareholders face dilution with a net effect of reduced percentage ownership). I have to say that I do not agree with skittle. I have looked at every leading iron ore company and every one has debt levels that are a significant percentage of stockholder equity. For a company like CLF to have debt of $1 billion on $6 billion in equity would make it such an anomaly (and underleveraged) in the industry. Even $2 billion in debt would make it underleveraged. That said, the question remains does the company have enough funds to service its debt. Well, at break even operations (if I can use that as a starting point), annually depreciation is +$550 million. Capital expenditures have been cut to $240 million a year. The dividend is $125 million a year. That leaves $140 million for principal repayments (interest payments are charged to income and fully covered in break even operations). As such, I doubt that there will be any problem with servicing CLF debt. Now, if CLF goes into massive loss making mode, this will bite into free cash flow and that $140 million in available yearly cash to pay off debt will drop. But then CLF could also eliminate its dividend, which creates another $125 million annually to pay down debt. As I see it, skittles does not have it right. His iron ore predictions may or may not be true, but I have NEVER met anyone remotely successful in predicting where commodity prices would be in the future. IF skittles is so sure of his commodity price prediction, he should be shorting iron ore. He will make more money there than doing anything here with CLF.

  • thedeathrace thedeathrace Oct 1, 2014 2:04 PM Flag

    Collapse to accelerate???? I think you have it wrong. If the stock declines further, the drop will decelerate.

  • thedeathrace thedeathrace Oct 1, 2014 1:58 PM Flag

    Where do you get $4-6 from? Is that a guess from the technicals? Is it based on some chart level? Is it based on some fundamental analysis of the business (and if so, what gets you to that specific price)? Thanks.

  • Reply to

    George Connell's 13D filing

    by thedeathrace Oct 1, 2014 12:46 PM
    thedeathrace thedeathrace Oct 1, 2014 1:20 PM Flag

    Cornell bought personally, not on behalf of some hedge fund. Cornell is clearly down on his position already, but that is not important to him I suspect. He just bought the stock and is wise enough to know that as a 5% holder, it will take a while for him to see the price appreciation he is looking for. If the shares drop $2-4 dollars, it is not fun, but it is probably not a big deal to him when he probably feels that the shares can go up $15 to $25. Good risk/reward. I suspect that he will be in CLF's for a year at minimum, but that is just a total guess.

  • Reply to

    George Connell's 13D filing

    by thedeathrace Oct 1, 2014 12:46 PM
    thedeathrace thedeathrace Oct 1, 2014 1:16 PM Flag

    you are correct...13G

  • thedeathrace by thedeathrace Oct 1, 2014 12:46 PM Flag

    The 13D filing of 5% ownership of CLF by George Connell is certainly interesting.

    1. He filed his 13D personally and not on behalf of any other entity. This stock is basically in his personal account. I would not expect him to acquire any shares in any other entity in which he is involved, eg Haverford Trust. I do not expect Haverford Trust to buy any CLF shares as that would make Connell's purchases front-running, which is illegal.
    2. That said, Connell is buying as he must see a profit opportunity. How large of a percentage profit, who knows.
    3. Connell purchased the shares in a brutal CLF share price decline and his buying did not result in any upward pressure on the share price.
    4. I doubt that Connell has any specific insider view of CLF or inside information. That is too dangerous a game to play with a well publicized 5% holding. Therefore, Connell is making an objective investment based on facts that are no different than those everyone else here sees. Given CLF's no-earnings-momentum profit profile right now, Connell is betting that shares offer upside based on super deeply discounted asset value.
    5. Connell is willing to bet against the short sellers at these prices.
    6. Connell's purchase doesn't really change anything regarding CLF's operations or future. He is just another shareholder. I do not expect Connell to trade out of his position quickly, but who knows.

  • Reply to

    ITT Default rate

    by contra_guy Sep 28, 2014 9:00 PM
    thedeathrace thedeathrace Oct 1, 2014 10:42 AM Flag

    Furthermore, the students who go to for-profit schools go there because it may be the only geographic option, may be the only place that has room for the student (as for-profit schools are full up with students and community colleges are shrinking under the awful tax burden the put on local communities). So, I think everyone agrees that the for-profit schools get many more subprime students than do the other colleges and their student who are financially poor have larger than average student loan balances (compared to the other types of schools - and this is not the fault of the for-profit school), and thus higher default rates. The for-profit schools also get students that have done less well in high school comparatively, which must translate into employment risk.

  • Reply to

    ITT Default rate

    by contra_guy Sep 28, 2014 9:00 PM
    thedeathrace thedeathrace Oct 1, 2014 10:31 AM Flag

    I was thinking about these default rate statistics again and then something else struck me. When comparing default rates for different types of school (for profit, community colleges and not-for-orfit private schools), it is really comparing apples to oranges.

    1. Harvard has a 1% default rate, but the students whose parents earn less than $60,000 per year go to school for free. If your parents earn more than that, I believe you still get huge tuition break. How are you going to default when you have no need to take a loan. I suspect that many many of the leading colleges (if not all) have enormous scholarship programs for people who are poor. Thus, the students with no money who normally would be the highest risk of defaulting get subsidized in their tuition, leading to very low student loan balances. These schools of course cherry pick the brightest and best low income students. Try being poor and a so-so student and get into the Ivy League. Fat chance. I suspect that the not-for-profit schools have lower default rates basically due to these circumstances. The low income student scholarship subsidies are basically financed by the schools enormous endowments (Harvard has $36 billion!) and alumni giving.

    2. Community colleges offer students enormous tax payer subsidies that reduce the tuition cost for students. These schools get money directly from local taxpayers and the students therefore have lower student loan balances on average compared to what they would have if their tuition were not subsidized.

    3. For-profit schools get no subsidies for student tuition. None. If they offer scholarships, which many do, that scholarship money comes right out of the schools pocket, as opposed to some annual alumni fundraiser or some huge alumni-funded endowment. The for-profit schools have to pay these scholarship costs themselves. In effect, the scholarship money is paid out of profits and paid out of the tuition revenues from students who can afford to pay

  • Reply to

    NEED TO FIRE THE CFO

    by expert_stock Sep 30, 2014 2:06 PM
    thedeathrace thedeathrace Sep 30, 2014 2:24 PM Flag

    You are probably correct, but I think that the CFO is just a shill for the CEO Modany. Modany is a well experienced accountant by background and has a CPA. He understands everything re ESI on the accounting side and there has been nothing done at ESI on that front that he is not well aware of or has not personally approved. As such, the problems with ESI accounting resides squarely on Modany's shoulders. Modany has also served as head of the audit committee (which I think was a huge error on the part of the company). Why have the CEO also run the audit committee? Audit should be a separate function from what the CEO does. Anyway, here is that part of Modany's background that outlines his accounting skills.

    Mr. Modany served as Executive Vice President, Chief Financial Officer, Director of finance and Controller of Consolidated Products Systems, Inc., a food distribution and retail services merchandising company, from February 1995 to September 1998. Mr. Modany began his career with a National accounting firm where he worked in the audit/financial consulting division and was consistently rated as one of the top performers in the local office. During his tenure he served as the Sr. Auditor In-Charge for the two largest audit engagements of the Pittsburgh office.

  • Reply to

    Again, Management sits on their hands

    by w999surf Sep 30, 2014 9:52 AM
    thedeathrace thedeathrace Sep 30, 2014 10:55 AM Flag

    The way I have been reading this chat board, Gonclaves would have to be on CNBC every day. So he goes on one day and then two days later there is another bear raid. Then what. The short sellers know that the guy has to spend his day running the business and not being on TV (and CNBC would not have him on everyday anyway).

    I think that CLF should do one of two things: 1. put out periodic press releases (every two weeks) that address issues that have come up (eg in the prior two weeks). I dont see any companies doing this and I am sure that it has crossed people's minds. So I suspect that it is probably not worth the effort. 2. Pick you spots (eg announcement of the large stock buyback and announcement that buyers are interested in the company's Australian assets). Then let the Wall Street bozos churn and burn on their own. If someone want to sell their shares at $8, who am I to deny the person the privilege! Let them take the loss and create a large gain for someone else who is more worthy.

    And I would rather have CLF buyback $200 million in shares at a price of $10, than a price of $18. As shareholder's, the buyback money is "your money". How do want to spend it? Buying at $10 or at $18? I think the answer would be $10.

  • Reply to

    Average PE

    by contra_guy Sep 26, 2014 9:11 PM
    thedeathrace thedeathrace Sep 30, 2014 10:31 AM Flag

    Shorts are not to blame for anything other than the following...

    1. shorting shares that are not borrowed, ie naked short selling.
    2. paying off the Department of Ed politicians and the Senate and House democrats to go after ESI and the other for-profit schools (but to not go after the private not-for-profits).
    3. For periodic short term manipulation of ESI share price.
    4. for manipulating the press in their coverage of education and student loans and the complex issues surrounding education and paying for it.

    The decline in the ESI share price in the end is a result of longs selling. The shorts have flooded the market with a large number of additional ESI shares, so that the number of longs is much larger than would be than if there were no shares shorted. All these longs have sold stock and those who bought those share then sold. And then those new buyers sold, etc etc. And here the stock is now at $4. Stocks go down because there are more sells than buys. Not to complicated.

  • Reply to

    CNBC--On stocks to watch.mentioned CLF

    by pwrsurfer Sep 30, 2014 9:57 AM
    thedeathrace thedeathrace Sep 30, 2014 10:07 AM Flag

    And CNBC also called AAPL dead at $420 last year and also did same on Facebook at $22. CNBC constantly said sell those stocks. CNBC is the worst. Their whole m.o. is to take the path of least resistance after the fact. If a stock gets hit and drops hard, they all say sell and bring on commentators who tell us how they have been selling and lightening up on their positions right up to the point to the price drop. Then when the shares go up significantly, it is the exact opposite. They tell everyone to buy and the commentators say how they were "buying on recent weakness". It is all a joke. Would you every give $1 of your money for these clowns to manage?

    It also reminds me how they were huge supporters of Stevie Cohen during his massive insider trading investigation. They all commented day after day how Cohen had done nothing wrong and so on. Of course, CNBC was being told to put a good spin on it all as Wall Street was collecting huge trading commissions from Cohen's insider trading operations. Then when Cohen settled with the SEC for that massive number (almost $2 billion!!!!!), CNBC said nothing against the guy at all and made no statement about how they had gotten it wrong.

  • Reply to

    Again, Management sits on their hands

    by w999surf Sep 30, 2014 9:52 AM
    thedeathrace thedeathrace Sep 30, 2014 9:58 AM Flag

    It does not matter. The hedge funds are feeding CNBC this baloney information. There is nothing that anyone can do about it other than to turn CNBC off. Bloomberg News Live is much better anyway. It is just a shame that CNBC bends over for these short sellers. The CNBC problem is that they have no news staff of any merit so they have to rely on these low life short seller hedge funds to get fed "newsworthy" information (when the info is actually all prepared and parsed by the short sellers to drive the stock price in question down).

  • Reply to

    Consumers Give No Value to Aluminum Trucks

    by w999surf Sep 30, 2014 9:41 AM
    thedeathrace thedeathrace Sep 30, 2014 9:52 AM Flag

    I am glad that someone posted this on the board. I saw that Ford was moving one of its truck to aluminum body. I do not think that they are moving from steel chassis though.

    Automotive chassis is considered to be one of the significant structures of an automobile. It is usually made of a steel frame, which holds the body and motor of an automotive vehicle. More precisely, automotive chassis or automobile chassis is a skeletal frame on which various mechanical parts like engine, tires, axle assemblies, brakes, steering etc are bolted. At the time of manufacturing, the body of a vehicle is flexibly molded according to the structure of chassis. Automobile chassis is usually made of light sheet metal or composite plastics. It provides strength needed for supporting vehicular components and payload placed upon it. Automotive chassis or automobile chassis helps keep an automobile rigid, stiff and unbending. Auto chassis ensures low levels of noise, vibrations and harshness throughout the automobile.

    I would say that the auto companies have been moving away from steel in cars for a long time. This is nothing new. The move to lighter weight vehicles has been going on for a long time. The use of various materials in a car/truck is based on strength, weight (fuel efficiency effect) and cost.

    If any of the price decline in CLF shares is due to the Ford announcement, I would say that the price drop is grossly overdone.

  • Reply to

    how much will the impairment charge be in Q3

    by matt91919191 Sep 30, 2014 7:11 AM
    thedeathrace thedeathrace Sep 30, 2014 9:44 AM Flag

    This is a thoughtful analysis and for sure any write down of goodwill is a non cash charge. Regarding depreciation, the issue is really the combination of amortization (of goodwill), depreciation of hard assets, and also depletion of natural resources in the case of mining companies. Goodwill may be amortized over 15 years. Equipment depreciation depends on the type of equipment and its useful life. Depletion depends on the estimated life of the deposits being mined. All three go into "depreciation", the non-cash charge against income. CLF had $550 million in these non cash charges to its income last year. That is a lot of gross free cash flow $ for a $1.5 billion market cap company. Regarding writing down assets, CLF already too $1.5 billion against Bloom Lake. There will probably be additional asset writedowns, but with a book value of $6 billion (goodwill is $3 billion) and a market cap of $1.5 billion, there is a ton of room for a writedown. If CLF wrote off $2 billion, shareholder's equity would still be $4 billion against a market cap of $1.5 billion.

ESI
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