But don’t cry for Blodget. Or even feel sorry for him. Remember that at the end of the day, he’s still famous, and he’s still rich. Merrill Lynch gave him multimillion-dollar paydays while he was hot, and he’s leaving with a severance package reportedly worth $2 million. Plus, he has a book contract. And unless he was foolish enough to put all his money into his own stock picks, he’s a multimillionaire. By contrast, investors who followed his advice to the bitter end got poor. And no one is offering them book contracts.
It’s tempting to rag on Blodget, whom I talked to once or twice and who struck me as a reasonably decent guy. Instead, let’s see what we can learn from the Blodget bubble. And from the role that the media had in promoting the ridiculous predictions made by people like Blodget, called by some The Great Predictor, and Mary Meeker of Morgan Stanley, a.k.a. Queen of the Net.
For starters, remember that Wall Street mantra: whose bread I eat, his song I sing. Despite recent reforms, many analysts’ incomes depend on how much business they generate for their employers from the companies they cover. Hello? Imagine that my income depended on how many ads NEWSWEEK got from the companies I write about. Do you think it would affect how I think? You bet it would.
You might not have known that the Blodgets and Meekers were in the pockets of the companies they allegedly covered, but every experienced business reporter knew it. (That’s why I almost never quote analysts, and why I generally don’t take their work seriously.)
Unfortunately, institutions that should have known better—most egregiously, CNBC and Fortune magazine—promoted these people endlessly, disseminated their views and gave them wide coverage. It attracted viewers, readers and ads. Life was great. Then, when the bubble burst, they tried to blame almost all of it on the analysts.
And if you’re into symbolism, consider this: The same day that The New York Times announced Blodget’s departure on its front page, the initial public offering of Weight Watchers hit Wall Street and was a big success. Two signs, you might say, that the days of pie in the sky are over. At least for now.
