The shorts turn on GE

Short interest in General Electric (NYSE: GE) rose 8.2 million shares, to 67.4 million. After all the excitement about future earnings and the stock trading over $40 for the first time in half a decade, the shares have slipped back to just above $38.

What appears to have happened is that the market is concerned that the black box known as GE Finance may have mortgage and high-yield loan problems. But GE is not saying much.

It is hard to find another explanation. NBC Universal should get good money from the upcoming Olympics. The company has won several aviation equipment deals and a large contract with Hitachi to build reactors for Entergy and GE Electric picked up $3.5 billion in building deals in the Middle East.

But GE plays the cards for its financial units very close to the vest. The operations have been money machines for years, but they have already been hit by some sub-prime problems. If the economy gets softer, questions will arise about its credit card portfolio and any high interest loans it may have purchased.

Some part of GE is always worrying investors. For now, it is financial services.

Douglas A. McIntyre is a partner at 24/7 Wall St.