So, I was flipping through some articles in Rolling Stone, when I found a very interesting economic story - yes, in Rolling Stone. The article, "Wall Street's Naked Swindle," takes a look at what happened in the options pits leading up to the death of Bear Stearns and Lehman Brothers. According to the article, an unknown option buyer made "one of the craziest bets Wall Street has ever seen," by shorting Bear Stearns. The unknown trader felt that Bear Stearns would lose "more than half" of its value in nine days or less, a bet that one financial analyst likened to buying 1.7 million lottery tickets.

What is crazy is that this bet paid off, leading to only one conclusion: insider trading (cue dramatic music). When Bear Stearns dropped from roughly $63 to $2 per share on March 17th (just six days later), the person purchasing the options made roughly $270 million. Senator Chris Dodd from the Senate Banking Committee thought that something wasn't on the up and up with this trade, and the Securities and Exchange Commission (SEC) promised it would look into the trade. Of course, nothing has happened since.

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!"

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.

Martha Stewart Living Omnimedia's (NYSE: MSO) recent announcement that its crafts line would be debuting in Wal-Mart Stores, Inc. (NYSE: WMT) stores nationally sent MSO up more than 5% at first, but the stock has since given all that back and then some: the stock is down nearly 10% from where it was before the announcement.
The company needs to replace the guaranteed licensing fees from K-Mart that are in the process of phasing out, and revenue from that business is likely to plummet when the guarantee declines from $65 million this year to around $20 million next year.

But Wal-Mart? Haven't their been entire books written on how tough it is to make money selling to Wal-Mart? It's easy for me to understand Wall Street's skepticism about this deal, and there have been a lot of uninspiring developments for the company in recent months: first the company paid $45 million for the Emeril empire, what was supposed to be company transforming acquisition. Then a few months later, CEO Susan Lyne resigned abruptly -- which doesn't speak well for the new strategy.

Maybe the Wal-Mart deal will work out splendidly -- but the company appears to be all over the place.

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.

Retailer Macy's (NYSE: M) first fiscal quarter wasn't that bad, at least in terms of the analyst game. The company, which competes with mall colleagues such as J.C. Penney (NYSE: JCP) and Sears (NASDAQ: SHLD), reported net income of 2 cents per diluted share from continuing operations. The denizens of Wall Street thought the company would lose 2 cents, so management came ahead in this regard by four pennies. Bravo!

However, does this news excite me? Not necessarily. Macy's needs a little help in its sales department. First, the overall top line declined almost 3%, coming in at $5.7 billion. Second, and perhaps even more telling, same-store sales were weak during the quarter, decreasing by 2.6%. And then there's the issue of cash flow. Operational cash flow from continuing operations was excellent compared with last year's quarter since $21 million was generated this time around as opposed to $370 million being used last time around. Nevertheless, when you take into account capital spending, no free cash flow was left over in the first quarter. And cash has been decreasing on the balance sheet. Oh, and gross margin went down, too.

I wasn't too taken by Macy's current earnings report, and I'm not putting the company on my list of investment ideas right now, even though the stock closed up yesterday on the news (heck, the company didn't repurchase any shares last quarter and stated that it didn't see any more share repurchases coming for the rest of the year, so apparently the stock isn't on management's ideas list, either). I think there might be better retail investments out there, such as Wal-Mart (NYSE: WMT) or Target (NYSE: TGT). Yes, the retailer may have strong associations with Donald Trump and Martha Stewart, but I will not be blinded by such celebrity value.

Disclosure: I don't own shares in any company mentioned here; positions can change at any time.

Last month, I reported that Martha Stewart Living Omnimedia (NYSE: MSO) was actively seeking an acquisition to diversify beyond its core Martha Stewart brand.

Now the company has found what it hopes is it's missing piece, and is set to acquire superstar chef Emeril Lagasse's [subscription required] media and licensing empire for $45 million in cash and $5 million in stock, according to the Wall Street Journal.

The purchase price will include the rights to Emeril's television programs, syndicated episodes of the "Emeril Live" show on the Food Network, cookbooks and Emeril's websites, and licensing deals from All-Clad cookware, Wüsthof cutlery, Wedgwood tableware and T-fal appliances. The acquisition also includes Emeril-branded spices, marinades, coffee, Bam! B-Q sauce and other food products, according to the Journal. Emeril's restaurants and corporate office are not part of the deal.

It seems likely that the market will react positively to this development, but I wouldn't be buying here. Martha Stewart Living Omnimedia hasn't been able to make much money from the Martha Stewart brand and adding another brand to a failing company hardly seems like a recipe for success.

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.

She's done cookware, linens, a magazine ... time ... but Martha Stewart, domestic goddess, is now foraying into the world of adult beverages. Early next year, wine connoisseurs willing to plop down $15 a pop will be able to ease open a bottle of what's currently being called Martha Stewart Vintage. The vintage, produced and distributed by E&J Gallo Winery, will use grapes grown primarily in Sonoma County, California, and will come in three varietals -- chardonnay, cabernet sauvignon, and merlot. Still on the drawing board is a possible rose version.

In its first year, the Martha Stewart Vintage will be in limited release, with just 15,000 cases being shipped to a small number of cities. Boston, Phoenix, Charlotte, and other cities where Ms. Stewart is especially popular will be among the locations lucky enough to stock the new wine.

While time will tell how successful this new vintage will be, Ms. Stewart is definitely hopping aboard the vino bandwagon at the right time. The availability of low-priced wine such as Charles Shaw (aka "Two Buck Chuck") has cultivated interest in the wine business in general, introducing the practice of wine appreciation to a broader demographic. While the $15 Martha Stewart Vintage doesn't exactly cater to the Two-Buck-Chuck crowd, it may benefit from the expected volume growth rate of 11% over the next 5 years.

But Martha's massive empire overall may not see a noticeable benefit from this new undertaking, no matter how successful. The wine venture is not expected to have a material impact on the fortunes of Martha Stewart Living Omnimedia's (NYSE: MSO).

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

After reporting a disappointing decline in second-quarter earnings and sales last week, Macy's (NYSE: M) is pulling out the big guns. Donald Trump and Martha Stewart are just two among a coterie of celebrities being employed in the department-store company's $100 million advertising blitz.

New television spots for Macy's - one of which will debut on September's Emmy-Award broadcast - will also feature R&B singer Usher, Tim Gunn from Project Runway, chef Emeril Lagasse, and hip-hop mogul Sean "Puff Daddy" "P. Diddy" "Diddy" Combs.

Also on the roster as a celebrity endorser for the Cincinnati-based retailer is Jessica Simpson. Seems like a bit of a slap in the face to hometown boy (and erstwhile Simpson paramour) Nick Lachey.

Stewart, figurehead of Martha Stewart Living Omnimedia (NYSE: MSO), also is working with Macy's on an exclusive line of Stewart-branded home products, which will launch this fall only in Macy's stores.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

MAJOR PAPERS:

• According to the Wall Street Journal, citing a person familiar with the matter, Bear Stearns Companies Inc (NYSE: BSC) plans to give its top trader, Warren Spector, the ax.
• The Wall Street Journal reported that Kroger (NYSE: KR) announced last week that it would stop selling milk that carried synthetic hormones that are made by Monsanto Company (NYSE: MON), despite the FDA saying the hormones are safe.
• A group of financial experts predicted that the U.S. will enter a recession soon, due to inflation, the economic prescriptions of a Democratic president, and the housing market meltdown, reported Barron's Magazine.

OTHER PAPERS:

• According to insiders, Martha Stewart is not happy with Lampert's Kmart chain as she feels the company is not doing enough to sell her Martha Stewart products in its stores, which in turn is causing a "drag" on Martha Stewart Living Omnimedia Inc's (NYSE: MSO) earnings, reported the New York Post.
• While shopping on the Internet has always been a 24-hour ordeal, some traditional retailers such as Sears Holdings Corporation (NASDAQ: SHLD), Kohl's Corporation (NYSE: KSS) and Dick's Sporting Goods Inc (NYSE: DKS) are starting to realize the potential of offering online-only discounts when their stores are closed, reported the Chicago Tribune.
• Qatari investment firm Delta Two may have to provide more than GBP1B in additional equity in order to win backing from J Sainsbury's (OTC: JSAIY) board for its offer for Sainsbury, reported the U.K. Times.

MAJOR PAPERS:

• Paul Tudor Jones runs some of the best managed hedge funds anywhere, averaging over a 24% annual return over the last 20 years, but last month they reported heavy losses, according to the Wall Street Journal.
• The Wall Street Journal reported that Google Inc (NASDAQ: GOOG) is speaking with wireless operators , such as T-Mobile USA and Verizon Wireless, as well as phone manufacturers about carrying their products.
• The Financial Industry Regulatory Authority is expected to fine Morgan Stanley (NYSE: MS) a total of $6.1M for alleged overcharging of customers on bond sales totaling $59M, reported the Wall Street Journal.
• Barron's "Inside Scoop" section reported that Andrew J. McKelvey, who stepped down as Monster Worldwide Inc's (NASDAQ: MNST) chairman and CEO last October, has sold 1.27M shares for $48.6M on the open market since Friday, according to SEC data.

OTHER PAPERS:

• Martha Stewart Living Omnimedia (NYSE: MSO) is reportedly joining with private-equity partner GTCR Golder Rauner to buy food-crafting company Wilton Industries and paint-by-number specialist Dimension Holdings, reported the New York Post.

WEBSITES:

• According to DigiTimes.com, Taiwan component suppliers for the iPhone have said they are not seeing any reduction in orders from Apple Inc (NASDAQ: AAPL).

Dow Jones & Co. (NYSE: DJ) expects to reach an agreement to sell itself to Rupert Murdoch's News Corp. (NYSE: NWS), ending a months-long soap opera that's tried the patience of media nerds like myself, according to CNBC's David Faber. No word on the final terms.

Looks like all of the chest pounding and teeth gnashing by Murdoch's many detractors, including members of the Bancroft family which owns Dow Jones, failed to stop the Australian media mogul just as I expected. The Bancrofts had no other choice. Saying "yes" to Murdoch, was much more lucrative and less potentially litigious than saying "no." There is no doubt that minority shareholders would have sued the Bancrofts for turning down Murdoch's $5 billion offer since the stock would have beeen sent into a tailspin from which it would never recover.

Worries about Murdoch are justified. You can expect the complaints about the tycoon's meddling in the Journal's editorial practices to surface in about six months to a year, perhaps sooner. It will be subtle and difficult for most readers to notice but it will happen. Though many Dow Jones journalists are cringing at the thought of working for Murdoch, they have little choice but to put up with him. Dow Jones pays well in an industry famous for paying poorly. Plus, most media companies aren't doing much hiring because of the current business conditions.

Since Dow Jones appears to have gotten a ridiculously high price for its company, Wall Street will wonder why small media companies such as the New York Times Co. (NYSE: NYT), E.W. Scripps Co. (NYSE: SSP), Martha Stewart Living Omnimedia Inc. (NYSE: MSO) and Gannett Co. (NYSE: GCI) can't do the same.

They better come up with an answer quickly.