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To: Nadine Carroll who wrote (1988)6/8/2003 3:01:06 AM
From: Michelino  Read Replies (2) | Respond to of 795420
 
Unfortunately, they haven't been regarded as having anything to do with the underlying business for some time now. A long enough bear market will cure that.

I absolutely agree with the first sentence, but cannot understand how a bear market will magically cure the disease. You are back to that intrinsic worth model. Consider that when a business is purchased, many intangibles contribute to the actual selling price, true due diligence may uncover factors that couldn't possibly be considered in the price. In fact, these days share price often offers only an order of magnitude estimate of what to expect when the business actually goes on the block. The volatility of ownership introduces an overwhelming amount of noise in the price...20 % drops on news that affect 2 percent of the bottom line and so forth. Stock ownership is now so temporary now that any ripples in the tide have more to do with value than long term prospects. But just like matter, and the uncertainty principle, it's the view from 20,000 feet from which you can measure direction .

So, in your view it's now going on eight years since the market price and its "fair" value were on the same planet. How does your model enforce adherence to reality? Will these two opposites ever attract? And if they make up, how long will they linger in each other's company? Even if I gaze into your world, it seems that a balanced market price remains about as fleeting as the call of the 17 year locust.

In fact, the dichotomy between the view of shares representing ownership (and responsibility!?) and the greater fool theory is a direct by-product of the trend to dramatically reduce capital gains tax (and even the definition of the same). The trend also led to the development of an itinerant executive class who now control most of the major corporation. They expect and get a high tithe regardless of performance.

Once there was a time when investors looked for management to grow equity by developing products, now investors and management alike act like the character “Morrie in the movie Goodfellas ("Jimmy...I want my money now")

I find it curious that you...then advance arguments that nobody on Wall Street will agree with. Everybody in finance and most economists..

This is most high praise. Perhaps you've guessed that I was trained as a scientist, not an alchemist.



To: Nadine Carroll who wrote (1988)6/8/2003 5:44:41 AM
From: LindyBill  Read Replies (2) | Respond to of 795420
 
UNDER INDICTMENT
Martha Stewart Surviving
Who's to say it won't be the SEC brand that takes a hit?

BY MARK STEYN - WALL STREET JOURNAL
Sunday, June 8, 2003 12:01 a.m.

Of all the many thousands of expert commentators on the Martha Stewart indictment, I believe I'm the only one who's actually baked a pie for her. It was a few years ago, when I used to host a weekly show for the BBC--current events mainly, but on Thanksgiving and the like we used to get Martha in for a bit of holiday cheer. So for the Christmas show I thought I'd make her a cranberry pecan pie with a lattice crust. The lattice crust took a bit of a beating on the twin-prop down from my place in New Hampshire to LaGuardia, and the cab ride downtown didn't help. But with a bit of prodding and stretching I managed to get the foil pie dish back into a more or less circular shape.

"That's your first mistake," said Martha. "Always use a real pie dish." (This was prior to the launch of the Martha Stewart Everyday Glass Pie Plate.)

"Not me," I said. "Cooking For Guys Tip No. 1. Always use a foil dish. That way if you can't get the pie out of the dish, you can always cut the dish off the pie."

We did so and Martha took a slice. "Mmmmm," she purred.

"Oh, come on," I said. "That's the kind of 'Mmmmm' you do when you're tasting Hillary Clinton's cookies on Good Morning America."

"No, no," she said. "It's much more genuine than that."

I cut her some pie and she cut me some slack. And I've been inclined to cut her some slack ever since. In my small experience of her, Martha was always droll and charming, far more droll and charming than many of the allegedly more likeable guests, mentioning no names. But in her rise to megastardom she somehow became, according to CNN, the woman you love to hate. Celebrities are always being damned as "perfectionists" and "control freaks"--Barbra Streisand, Paul Simon, etc. But a celebrity whose entire act is that of a perfectionist and control freak is, in a delightfully postmodern way, an excellent joke. As a general rule, I'll take the unreasonably demanding perfectionist over the hacks and mediocrities bitching about the unreasonably demanding perfectionist--and that was before I sat through a gazillion TV news reports beginning, "A criminal indictment is NOT a good thing"--ha-ha.

If you were going to cast her as a villain, she'd be the murderess in a "Columbo" episode, the one who commits the perfect crime it takes Peter Falk two hours to unpick. Instead, everything about l'affaire ImClone seems as slapdash as my pie. According to the prosecution, Martha's broker faked the exonerating paperwork by using a blue pen that didn't match the blue pen in the rest of his notes. That's exactly the lack of attention to detail Martha's railed against all her life. It's the equivalent of not making enough crème patissiere and saying, "Ah, to hell with it. A dollop of Cool Whip'll do." Not for the first time you can't help noticing that, as with most stories about unreasonably demanding perfectionist celebrities, under the control-freak exterior they seem to be amazingly indulgent of the various third-rate flunkeys around them. Not that Martha's alleged decision to gild the phone logs with a dab of Liquid Paper was the smartest move.

And now, inconceivably, Martha Stewart has stepped down as chairman of Martha Stewart. I don't see how that can work. Martha isn't an officer of the company, she's the product. Martha Stewart Paint is not paint in the sense that Sherwin Williams Paint (its distributor) is. If Sherwin had a serious crack habit and Williams was going out nights and cruising as a transvestite hooker, it wouldn't make much difference; you'd still have the paint. That's not the case with Martha's "Pressed Leaves" hue: She's not selling paint, she's selling Martha in paint form. Martha's products are like her gilded pine cones. You can't scrape off the gilding and pretend that what's left is unchanged in value.

That's Martha's real genius. She took the so-called aspirational demographic to new and deranged heights to the point where it morphed into a brand new category of parodic aspirational. Even when she parlayed her anti-store-bought sniffiness of her books into a massive merchandising spinoff of stuff you can buy at Kmart, the names of her product lines cleverly indicated degrees of personal commitment--"Martha Stewart Signature," "Martha Stewart Everyday"--i.e., you really should be making your own authentic colonial milk paint and coxcomb topiary, but, if you can't live up to Martha's standards, you might as well make her the beneficiary of your sloth.

Most analysts reckon there are two options facing Martha Inc.: The brand will sink with its creator, or it will successfully distance itself. Perhaps this makes sense to those immersed in the financial world, a culture of evasive acronymic generalities, where the Hongkong and Shanghai Banking Corp. is now HSBC and, instead of the First National Bank of Dead Horse, Nev., American banks now have names like "Key" or "Banc One." Or is it Banque One? Supposedly hard-nosed financial institutions are far more prone to chichi upscale soft-focus herbal-scented ersatz Continental designer pabulum than Martha: Andersen Consulting now goes under the name Accenture, which should be the name of Martha's paint line.

But I can't see Martha Stewart Living going down Evasion Avenue and emerging as MSL or Elegantia. Let me suggest a third option: The brand won't be able to shrug off the founder, and it will survive and eventually prosper. The prosecutors are at the very least overreaching and in some ways attempting a wholesale redefinition of the concept of "fraud." Who's to say it won't be the SEC brand that comes out of this looking like unreasonably demanding control freaks?

Martha, on the other hand, is a master of surviving setbacks. As I understand it, on Monday the feds gave up trying to cut a deal with Martha because (so I hear) she genuinely believes she's not guilty. Copping a plea is like using store-bought meringue nests or pumpkin-pie mix: it's quick and easy but you feel ashamed and everybody knows, even if they don't say anything. If Martha's going down, she's going down true to her philosophy, with a hand-stitched, beautifully detailed, exquisitely tooled case for the defense. I'm betting it'll be like the flora and fauna in her homemade Christmas decorations: Establishing gilt is harder than it looks.

Mr. Steyn, a columnist for Britain's Telegraph Group, is the author of "The Face of the Tiger" (Stockade Books, 2002), a collection of essays on the world since Sept. 11.
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