mso

Today was another up day and you have to wonder if the woes of the world we all felt a few short months ago are just gone for good. Bernanke said the recession is effectively lower. The inventories are getting low enough that a manufacturing surge could come. And inflationary fears are not scaring traders. If this was a football game, it seems that the bulls keep scoring, and the bears just got a couple accidental safety scores.

Here are today's unofficial closing bell levels:

Dow 9,683.41 +56.61 (0.59%)
S&P 500 1,052.63 +3.29 (0.31%)
Nasdaq 2,102.64 +10.86 (0.52%)

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If I was worried about the fate of Martha Stewart's flagship magazine, Martha Stewart Living, perhaps my concerns were unfounded. The statement from Martha Stewart Living Omnimedia (NYSE: MSO) could not be more bold, more unfailingly optimistic (like Martha herself): Martha is getting a raise.

It's a big one, from her current CEO salary of $900,000 a year to at least $2 million annually for the next three years, plus a hefty "retention incentive" of $3 million today.

But where was she going? you might ask. After all, the company is her very self, media-opolied. As far as I can tell, she was going nowhere, but without her there is little left. Martha's aspirational persona has made an indelible mark on our culture, one that has no danger of falling victim to our economic downturn. She represents the soul of the DIY ethos; not for nothing do people say of any well-executed craft, especially one involving vintage pieces found at a thrift store, "that's so Martha!"

In a previous post about the medium I call "periodicals printed on paper," I wrote that the universe of magazines and newspapers was being winnowed, and only the very best would survive. As my mind's eye darted around a mental image of a newsstand, a few periodicals stood out as "best"; Martha Stewart Living chief among them. MSL has not just created a loyal following and niche audience; it is a symbol of an entire subset of the population, an aspirational icon who is, while not exactly an ordinary person herself, creates a mostly achievable lifestyle. Her magazine will always represent the soul of the DIY culture; not for nothing do people say of any well-executed craft, especially one involving vintage pieces found at a thrift store, "that's so Martha!"

This post is part of a feature in which we wonder whatever happened to some notorious financial felons. See all 17.

I sometimes get the impression that people think I'm joking when I say I love Martha Stewart. I get it; I don't look like I have much in common with Martha. My apartment is cluttered, my cleaning habits are slapdash at best, and my hair is generally unkempt. I have at least a week's worth of random garbage traveling with me in the Hyundai at all times -- and I often get the distinct impression that people from New England are looking down on me.

Despite our differences, Martha is a personal hero of mine. Flipping through her magazine, Martha Stewart Living, is not unlike paging through a National Geographic. It's a glossy, impeccably photographed glimpse into an exotic world that I can only hope one day to visit. If the July 2007 issue can be believed, Martha is the type of woman who, on a whim, jaunts out to East Hampton for a weekend of kayaking and antiquing. In between horseback rides and hikes, she just might whip up some pasta with salted pressed fish roe, or perhaps a nice avocado gelato. Can you imagine?

So you can appreciate my shock upon discovering that Martha, this creature of uncommon refinement, might also be a common white-collar criminal. On December 27, 2001, Stewart dumped 3,928 shares of ImClone Systems (NASDAQ: IMCL) through her broker, Peter Bacanovic of Merrill Lynch. Martha -- the CEO herself of an eponymous multi-million-dollar media empire, Martha Stewart Living Omnimedia (NYSE: MSO) -- raked in about $288,000 from the sale. The next day, after the market closed, ImClone announced that its cancer drug Erbitux had been rejected by the Food & Drug Administration. It was an explosive bit of news that sent ImClone shares plunging.

If you are involved in the market right now and watch the volatility with swings up and down, it might be easy to forget that trading volume is very thin and that moves can be exaggerated easily. Today's numbers, with a recession in Europe and stagflation rising in the U.S., were discounted by traders looking ahead and interpreting data out on the calendar. The good news in housing is that existing houses are finally moving, but the bad news is that they are selling under replacement cost.

Here are today's unofficial closing bell levels:
DJIA 11615.93 (+82.97)
S&P500 1292.93 (+7.10)
NASDAQ 2453.67 (+25.05)
10 YR T-Note 3.892% (-0.055%)
52-Week Lows

Alcoa Inc. (NYSE: AA) is a bit of a mystery. This had very unusual call option buying seen in the stock, yet shares were down marginally on the day by less than 1% at $31.96 before the closing bell. This stock has been the subject of rumors before, so anything is possible.

Gannett Co. Inc. (NYSE: GCI) was a winner today. Shares were up 10% at $21.20 right before the close on reports that it was cutting 1,000 newspaper jobs or about 3% of its workforce.

Hansen Natural Corp. (NASDAQ: HANS) was a huge winner after Nelson Peltz' Trian Funds disclosed an ownership stake. Shares were up over 10% at $29.79 in the final minutes of the trading day, and this is up almost 40% even after poor earnings recently.

PMI Group Inc. (NYSE: PMI) was a big winner today after the company sold off Australian operations for $920 million in a capital raising effort. Shares were up almost 60% at $4.45 in the final minutes before the close.

Martha Stewart Living Omnimedia Inc. (NYSE: MSO) shares were up almost 8% at $8.80 right before the close after Jim Cramer interviewed Martha Stewart herself and said the stock is cheap at $8.00.

Martha Stewart's daughter Alexis and Jennifer Koppelman Hutt, co-hosts of a show on Sirius Satellite Radio, are teaming up for a new television parody of vintage Martha Stewart Living episodes. The title? Whatever, Martha!

Surprisingly, the show has the blessing of Martha Stewart, who is not normally known as a barrel full of laughs. She told The New York Times that "They promised not to be mean, and I had to trust them. I'm not going to have a heart attack."

The half-hour show, set to debut on Fine Living on September 16th, will feature old clips from Ms. Stewart's show alongside sarcastic commentary from her daughter and Ms. Hutt. There are no clips available online but it sounds similar to ESPN Classic's Cheap Seats.

It's nice to see that Martha Stewart has a sense of humor. Given that shares of Martha Stewart Living Omnimedia (NYSE: MSO) have gone from $20 to $8 in a little more than a year and a half, she will need it. The debut of the new show is symptomatic of the problems the company is facing: Stewart went from an icon to a cliche, and now she completes the cycle by becoming a joke.

With the recent resignation of its CEO following the completion of the Emeril acquisition, this is a company in turmoil. Given its lackluster ability to generate profits during its prime, it seems like a stock worth avoiding.

In the News:

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If Only Martha Stewart Was a Little More Patient
If they only had been more patient investors of ImClone Systems, Martha Stewart and others might have done just fine, and avoided jail time. In a strange twist, ImClone -- the biotechnology company whose stock was dumped just before bad news was announced about an experimental cancer drug -- has received a multibillion-dollar takeover bid pegged to the success of that very same drug.
Once Dumped, ImClone Soars - NYTimes.com

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FORTUNE's trademark long-term portfolio can help put you on the road to a secure future. They include Abbott Labs, Coca-Cola, Procter & Gamble, Cisco, 3M, Walgreen, Cascade, Novaratis and Vodafone to name a few of the 40 stocks on FORTUNE's list.
Fortune 40: Best stocks to retire on - FORTUNE

Shoppers Beware: Products Shrink, But Prices Remain the Same
There's a reason why the tub of ice cream you bought last week looks a tad smaller than ones you bought last summer. It is. Many major ice cream makers, hit by higher dairy costs, have shrunk their standard containers to 1.5 quarts from 1.75 quarts, about 1 cup less. As packaged goods makers' costs rise, they eventually have just two choices: raise prices or put less stuff in the package. While most are trying a price boost first, a growing number are shrinking the contents of their packages -- from Frito Lay's chips to Dial soap to Dreyer's ice cream. Other shrinking products include Hellmann's mayo down to 30 oz. from 32 oz., Cheerios & Wheaties have shrunk 1.5oz., Bounty papertowels down to 60 from 52 towels and more.
Shoppers beware: Products shrink but prices stay the same - USATODAY.com

Today was yet another day where Joe Public felt like he spent a round in the ring with Joe Lewis. It's getting that way again, and now the only real positive is that contrarians may start to get happy.

Oil jumped back up another $5.00 per barrel on inventory numbers reported this morning. The continued weak environment sent financials and airlines into the dirt again. PIMCO's McCulley said he believes that the Fed is understating inflation and the Fed's Beige Book hinted that some higher costs are beginning to be passed down to consumers.

Here are the unofficial closes of major US index levels:
DJIA 12082.14 (-207.62)
S&P500 1335.56 (-22.88)
NASDAQ 2394.01 (-54.93)
10YR T-NOTE 4.07% (-0.026%)
Top 10 Analyst Calls

Anheuser-Busch Companies Inc. (NYSE: BUD) saw another big pickup in its call options activity today and then CNBC's David Faber said that InBev in Europe may be close to making an unsolicited bid for the company. Shares were up about 2.3% at $58.45 in the final minutes of the day.

Bad news out of Martha Stewart Living Omnimedia (NASDAQ: MSO) today: CEO Susan Lyne has stepped down after four years as the company's CEO. President of Media Wenda Harris Millard and President of Merchandising Robin Marino will become co-CEOs.

Oh, how quickly things change. Back in April, Martha Stewart Living announced that it was acquiring the Emeril brand for $50 million, with an optimistic Lyne saying, "This acquisition is strategically important to our company as we continue to expand and diversify our business and represents a significant opportunity for us going forward." The company said it expected the acquisition to add $8 million of EBITDA in its first year of operation. Now Lyne is gone without explanation, and the press release didn't even mention the "strategically important" Emeril deal, which has a value of more than 10% of the company's market cap.

Big-Money Bets of the Billionaires
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10 Things Your Tax Preparer Doesn't Want You to Know
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10 Things Your Tax Preparer Won't Tell You - SmartMoney.com


How To Make A Million Before You Turn 20
While their peers were out making trouble, these young achievers were making mega-dough. Here are tips from five young entrepreneurs who made fortunes fast.
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Does This Bag Make Me Look Fat?
Watch out, 100-calorie snack packs - there's a new magic number in portion-control land: 90. Also 80. And 70. Or even 60. Packaged-food giants from Quaker to Kraft (KFT) have discovered that calorie-conscious snackers who turned 100-calorie packs into a $200 million annual gold mine are getting bored with 100. So the bar is falling.

Snacks ask: Does this bag make me look fat? - USATODAY.com

MAJOR PAPERS:

• In a diversification move, Martha Stewart Living Omnimedia Inc (NYSE: MSO) will reportedly acquire the media and licensed properties of well-known TV chef Emeril Lagasse for $45M in cash and $5M in stock, according to the Wall Street Journal.
• According to the Wall Street Journal's "Heard on the Street," the current quarter for Lehman Brothers Holdings Inc (NYSE: LEH) will not be good and it also has a sizable amount of commercial real estate loans which could lead to bigger write-downs. The latest estimates are of an approximate $1.3B write-down, above recent estimates, and higher than the $830M in the fourth quarter.

OTHER PAPERS:

• The Australian Financial Review reported that General Electric Company (NYSE: GE) has emerged as a new contender for Allco Finance Group's transport leasing, property and power assets.

WEB SITES:

• Motorola Inc (NYSE: MOT) is suing Research in Motion Limited (NASDAQ: RIMM) claiming the company violated seven U.S. patents covering mobile-communications technology, Bloomberg reported. Research in Motion also filed a suit against Motorola claiming the company infringed on Research in Motion patents.

With its stock sitting in a toilet that would make the housekeeping goddess cringe, Martha Stewart Living Omnimedia (NYSE: MSO) is looking for something to boost its operations.

Fortune reports it has learned that the company "has held recent talks with two prominent tastemakers, the fashion designer Cynthia Rowley and Jonathan Adler, known for his home décor, with the aim of building multifaceted brands around these personalities that span television, publishing and the internet."

The talks have reportedly broken off, but CEO Susan Lyne has said that she is on the prowl for acquisitions. Acquisitions have a bad habit of failing to generate value for the acquirer, and Fortune notes that "The pressure to do a deal will intensify this year, as MSO prepares to take a hit on several fronts." And therein lies the problem.

The company has historically been unable to generate a profit, and that's not going to get any better in the near future. An acquisition driven by what amounts to desperation is unlikely to change that. And signing a big star will cost a lot money, and the value of that star's brand will tend to aggregate to them, not MSO -- that's the nature of licensing deals.

Bottom line: If you want to buy shares of MSO, it should be because you're bullish on the future of the company as it is now, not because you're hoping that a management team that has failed to generate value can make a killer acquisition that will restore the company to its once high-flying status.

If anything could be blamed for the just-announced shuttering of Blueprint magazine, it could be the current issue's cover, in which a pink (!!) tree is out-sparkled only by the sequined frothiness of the bleached blonde holding a gigantic bauble alongside. Inside we see 20-something editor-in-chief Sarah Humphreys, who writes, "... if Blueprint's taught me anything, it's that there's plenty of room for spiced sugar bomboloni at the Thanksgiving table."

Umm. OK, Sarah. Martha Stewart Living Omnimedia (NYSE: MSO) strayed a little too far from the company's audience of blue-bloods and those who aspire to craft like them with Blueprint, a magazine unfortunately titled (evoking architecture of the blue-collar sort, not "where to find candles made of pink glitter"). It was meant to target the young single urbanite; but what newly-married aspirational New Englander wants a magazine full of recycled Martha Stewart Living projects, mixed with lipstick and gilded fashion advice? Evidently, not many.



The "brand" will be re-envisioned as a way to extend the audience of Martha Stewart Weddings past her nuptials, with occasional "special interest format" magazines (think Martha Stewart Baby), and the Bluelines blog will continue. The January/February 2008 magazine (probably already on the way to newsstands) will be the final standalone issue.