11
June
2009
|
10:50 PM
America/Los_Angeles

The Comeback Of Wall Street's Bad Boy Internet Analyst : A Henry Blodget Retrospective . . .

HenryBlodget.jpg

Henry Blodget was the poster boy Internet analyst that everyone loved to hate during the Internet mania years. He could and did move markets with his analysis. He often chose outrageous targets for companies such as Amazon and he was often right.

But when the dotcom boom turned into a dot bomb he became the most visible target for the backlash to all the Internet hype and tears of many broken investors. And he also became a target for an army of lawyers.

Mr Blodget was barred from the securities industry and forced to pay a $4 million fine.

A lot of people took pleasure in his downfall. The British love to use a German word "schadenfreude" to describe that peculiar aspect of human nature.

Yesterday, that whole affair came to a close. The fines that Mr Blodget and top Wall Street firms had paid into a fund had been paid out to qualified plaintiffs, and there was money left over.

Mr Blodget wrote about this on Silicon Alley Insider, a New York based news site that he founded and that is very successful. (The site is a testament to Mr Blodget's continued analytical prowess.)


As most of you know--and as some of you are fond of observing when I say something you disagree with--back in 2003, I was named in a civil fraud complaint the SEC brought against Wall Street after the dotcom research and investment-banking scandals. As you may also know, I paid $4 million (oof) to settle my share of that charge, and I got booted out of the securities industry.


There follows an interesting account of what happened to his $4 million (plus $200K interest - the headline gives it away :) Blodget's SEC Fine To Reduce National Debt By $4.2 Million

But it's the comments that added a lot to his post. People are sharing how they were trading in those heady days and the huge effect of Mr Blodget's words on the market -- and on their fortunes

For example:


Daily Bail writes:


One of the best pieces I've ever read from you. I don't know how you kept all sense of anger out of the post. I read it 3 times trying to find even one flicker of deserved indignation on your part, and there was nothing there.


...I traded against your picks in a general sense from 1998 onward. I was a semi-notorious short-seller trading with about $15 million of personal funds (including margin) against the entire networking/dotcom/infrastructure mania of the time.


It almost bankrupted me. I remeber the day Julian Robertson publicly folded his short positions against all of these companies and I knew that must have been the top. It came about 3 weeks later on my birthday March 10th of 2000. I had had a horrible week trading as the NAZ kept rallying with the breathless daily, siren calls from Maria Bartiromo talking about NAZ 10,000.


I lost $1.5 million that week as the NAZ rallied hard and I continued to add to my short positions everyday. Microstrategy, Priceline, Infospace and many others.


It was the worst birthday weekend of my life as I contemplated being wiped out the following week. IT turns out that that Friday was the top. I made $2.7 million the following week and about $3 million the week after as I hammered these over-inflated pieces of hype and hope with more and more stock.


The period from Mid '99 through mid 2001 in these spaces (as we used to say) is almost impossible to explain to people these days. It was the most surreal trading environment ever seen.


Jizmo writes:


Historically, all regulators burn the pathfinders; accept that and resume taking your bite out of life.


Personally, I'm proud of your snappy little self!


Alan writes:


Dot Com days were fun and then horrible. Doubled my money in no time and lost most of it back in no time, but I did manage to buy a very nice house with some of the money and that investment kept me from losing even more than I would have if I hadn't bought the house.  


...So every time I look out at the Pacific Ocean view I thank the Dot Com mania for at least giving me something of substance.


So what is the next crazy bubble investment?


There's more here: Blodget's SEC Fine To Reduce National Debt By $4.2 Million



Foremski's Take:

I feel that the end of Mr Blodget's penance is significant because I see it as potentially the start of a new period, one that isn't defined by the sins of the old era and exists according to its own laws of physics and economics.

For too long we've been looking backwards at the mistakes of a prior decade. Now we are free to make new mistakes and that is exciting and a lot more interesting.