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Catching Up on Stewpid Chatter, the Iridiots and Others

Funny how the Hostile React-O-Meter has stopped spinning.

From the lessons-to-be-learned department: Couldn't help but notice a letter in Jen Howze and Jane Penner's sizzling new TSC Weekender column from reader Rainer Ronsch of Dresden, Germany, who wanted to know whether there's a "hard-and-fast rule" to how long short-sellers can damage an otherwise healthy company.

Short-sellers damage an otherwise healthy company? Rainy, my man, short-sellers don't damage companies; companies damage themselves.

Just take a look at what happened while I was away last week (a mere coincidence?). Four -- count 'em,


-- of this column's old faves confessed that their biz has gone bust or may be something less than what investors had believed. These weren't just


four. These were four whose followers sent this column's Hostile React-O-Meter spinning out of control, I tell ya, spinning

out of control!

We're talking about



, which filed for bankruptcy. We're talking

Family Golf Centers


, which said it may be forced to file for bankruptcy. We're also talking



, which just two weeks ago declared that a review of its financials showed no accounting irregularities. Last week it issued a terse statement saying that its second-quarter results would be delayed pending the outcome of a review with its independent auditors.

Sabratek didn't say what the new review was for -- audits usually don't occur until the fourth quarter. Company officials didn't return my call yesterday. (Ya don't think it involves any of those questionable quarter-end transactions that were recently

mentioned here, do ya?)

Then there's

Stewart Enterprises


, the operator of funeral homes and cemeteries. The Stewart saga started

earlier this year after

Service Corp.


issued the stunning warning that funeral industry fundamentals had taken a turn for the worse, in part because of the falling death rate.

Loewen Group


had already filed for bankruptcy, and short-sellers believed it would only be a matter of time before Stewart, buried in debt, would suffer along with its rivals.

Stewart, on the brink of issuing $250 million in stock, argued otherwise. In a hastily summoned conference call following Service Corp.'s warning, Stewart CEO Joseph Henican said that "the death rate is something that is irrelevant to us."

He also called the rise in cremations, which cut the costs of funerals (and the profits of mortuaries), an "

opportunity." And he said that Stewart's business opportunities were better than they'd ever been as a public company, calling the back-to-back troubles at Loewen and Service Corp. an "odd coincidence."

But as this column pointed out at the time, it's almost always a big red flag when a company in an industry claims it's immune from generic industrywide conditions.

Adding to the intrigue: In June, short-seller David Rocker was

quoted here saying that based on the prices Stewart had been paying for funeral homes -- coupled with the falling price of funeral homes being dumped by Loewen -- Stewart's stock wasn't worth much more than 4.

That caused Stewart's stock to stumble and prompted

J.P. Morgan

analyst Joseph Chiarelli, to reiterate his buy in a report headlined, "Overreaction to Internet Article Unwarranted."

Then came last week's news: Stewart warned that its third- and fourth-quarter earnings won't meet analyst estimates. It blamed, among other things, a rise in cremations and a rise in other forms of low-cost competition.

Didn't that same competition exist earlier this year? Wasn't the rise in cremations supposed to be "an opportunity?"

Stewart officials didn't return my call yesterday. Chiarelli, meanwhile, sliced his rating last week to market perform. And Stewart's stock, which had been in free fall, closed yesterday at 6 1/16. This note to anybody who ignored the warnings and bought into the January offering of about 14 million shares at 16 3/4: Don't go blaming your troubles on short-sellers.

Short Positions

Stop the presses -- two more blowups yesterday:

CKE Restaurants


, no stranger to this column, tumbled to a new 52-week low after warning that sluggish hamburger sales at

Carl's Jr.



would cause earnings to fall below analyst estimates. (And this time it didn't blame its trouble on the weather; seems the company finally ran out of excuses.)


CHS Electronics


, already reeling from a series of accounting and earnings debacles, reported lower-than-expected second-quarter earnings. It also said it's running low on cash and doesn't have enough to cover the costs of earlier acquisitions. It also said (in legalese) that it's in violation of terms of agreements with three lenders.

Accountants beware:

Thanks to

Adam Lashinsky


covering, in my absence, the


suit against

California Micro Devices


. This lawsuit, if successful, would serve as a warning to auditors of all public companies that they may be held responsible for failing to catch egregious accounting, not just making sure a company's financials are prepared according to generally accepted accounting principles.


Tried to get away from intensity of New York/New Jersey by taking a cruise on Celebrity's Zenith to Bermuda. Impeccably maintained ship. Food wasn't bad, either. But who was to know that 80% of the passengers on the overbooked boat would be from -- where else?! -- New York and New Jersey? Yikes. But Bermuda's South Shore beaches made up for it. Love that Horseshoe Bay.

Next time I think we'll fly.

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

Mark Martinez assisted with the reporting of this column.