Publish date:

Beware of the Mother of Short Squeezes

Also, what SFX didn't tell investors, more Conseco capers and some tips for the timid.

Fried-Day (and, Boy, Do I Mean It)

Squeeze 'em, cowboy -- yee haw!

It's really enough to turn your stomach. The mother of all short squeezes continues with full force, causing most shorts I know to seek the safety of storm shelters. (Most really have gone underground.) But as the squeeze intensifies, so does the risk to investors who think they're geniuses because it has been simply so darn easy to make money. Nobody,

nobody

, has ever seen any squeeze or anything quite like this. At least nobody I know, and while I hate to brag -- gee, gosh, golly -- I know a

Palm

(PALM)

Pilot

full of people! (Did I say Palm Pilot?!)

So lemme repeat what I said on Tuesday: When the short-sellers are gone, so is the natural cushion of buyers (which shorts become when they cover their positions on the way down). If the companies really blow their earnings or disappoint in some other way, and the shorts are not there, it's "LOOK OUT BELOW!" It's drop a stone in a canyon. It's gravity at its best.

Lernout & Hauspie

(LHSP)

: Oh, the pain to the shorts (yet the company's fundamentals haven't improved).

Ancor Communications

(ANCR)

: Oh, the pain to the shorts (yet the company's fundamentals haven't improved).

Open Text

(OTEX) - Get Report

: Oh, the pain to the shorts (yet the fundamentals haven't improved).

This market is setting itself up for something -- I'm not sure what -- that they'll be talking about for years.

Of course, they've been saying

that

for years!

SFXed:

Lost in the shuffle of

SFX's

TheStreet Recommends

(SFX)

sale of itself to

Clear Channel Communications

(CCU) - Get Report

was the entertainment concern's fourth-quarter earnings. Well, it was easy to miss the fourth-quarter story because SFX didn't report the fourth quarter. It just reported year-end results.

Analysts who backed into the numbers from prior quarters, however, figure they know why the company didn't report the quarter (and why the company sold itself): Because it was lousy. Earnings before interest, taxes, depreciation and amortization -- the number SFX prefers to use -- were a mere $20 million. A mere, I say, because analysts had been looking for $30 million -- and that's

after

cutting estimates in December when the company warned that its earnings wouldn't meet estimates because of Y2K-rattled New Year's Eve ticket sales.

SFX officials, contacted earlier this week, haven't returned my call.

Conseco capers:

Remember the legal tussle

Sears

(S) - Get Report

found itself in awhile back, after its credit card company continued to seek payments from customers who had filed for bankruptcy? Well, keep an eye on

Conseco

(CNC) - Get Report

. A class-action lawsuit, filed in the U.S. District Court for the Eastern District of California, claims Conseco's

Green Tree Financial

unit did just that, and assessed accrued interest charges, with a homeowner who had filed Chapter 7 bankruptcy.

Conseco has filed to dismiss the case because the Green Tree contracts call for arbitration, which would prohibit class-action suits. Lawyer Ron Goldser of Zimmerman Reed in Minneapolis, however, says a hearing is scheduled to determine whether the suit can continue. (He believes the arbitration clause ends when there has been a bankruptcy.)

It's unknown whether the practice was widespread, but Goldser told me there's no statute of limitations in the bankruptcy code regarding such lawsuits. In fact, he's about to file a second case involving another former Green Tree customer.

Tips for the timid:

Look for another installment later today of my "Tips for the Timid" -- clues to spotting financial trouble before it occurs.

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.