| 35-year-old sell-side analyst with Merrill Lynch, specializing in Internet companies. Fairly or not, he's held up as a poster boy for Why Things Went Wrong.
In 1998-99, Blodget (then at CIBC Oppenheimer) was a Wall Street star for picking the stocks that fueled the dot-com boom. In particular, he made the then outlandish claim that Amazon.com would hit $400 a share. When it actually happened, his reputation was cemented. He became a favorite on CNBC and business news shows, and his pay package grew to $5 million a year.
But Blodget failed to see the dot-com crash coming, or at least failed to tell anyone about it. He clung to his "buy" ratings while stocks fell like so many Skylabs, and didn't downgrade until after the tide had turned. (N.B. Plenty of analysts made this mistake, as often happens. Sockpuppet has written an excellent analysis of Wall Street's herd mentality: see "stock market analysts are full of crap.")
To be fair, Blodget has long believed that most Internet companies will fail. He might even have said so during the boom, I'll give him the benefit of the doubt on that. But like many analysts, he refused to believe in the dot-com crash -- at least outwardly -- until it was too late.
Blodget is further singled out because of accusations that he stayed optimistic to keep Merrill Lynch in favor with dot-com clients. The Wall Street Journal is among the papers to report this.
On July 19, 2001, Merrill Lynch settled an arbitration case with a former client who claimed Blodget's bad advice led to a loss of about $500,000. This could lead to a rash of suits against investment banks who overhyped the dot-com era.
Blodget wasn't alone in missing the dot-com crash, of course. Plenty of people lost their heads during that time, and they've fallen out of favor as well. See Mary Meeker.
Source: 7/20/01 Wall Street Journal, also previous WSJ reports on Blodget.
Update: On Aug. 1, 2001, Mary Meeker got hit with a lawsuit similar to Blodget's, the first of eight lawsuits that came her way. But in October 2001, federal judge Milton Pollack dismisssed all eight suits "with prejudice," calling them "gross and unrestrained." That ruling quashed the thousands of other class action suits that may have been waiting in the wings (although it's still feasible for individual investors to sue individual firms on a case-by-case basis).
Blodget left Merrill-Lynch in November 2001 as part of a voluntary layoff, taking a $2 million severance package. Reuters estimated his 2000 salary at more than $5 million. C-Net reports he's writing a book for Random House.
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