I have to admit, at one time Henry Bodget was my hero. I was a tech analyst in the late 1990s and I thought Henry made one of the all time great calls with his huge price target on Amazon.com. I still remember the morning that the news headline flashed across the screen on CNBC because I instantly knew he was going to be right. He nailed the "zeitgeist" of the Internet bubble and made a fantastic call. It took a great deal of understanding, analysis and guts to realize that AMZN had the potential to get to $400 (pre-split) and then to actually go public with the analysis. Say what you will, I think this was truly an amazing feat to this day.
Once he moved to Merrill Lynch, Blodget lost my respect because he became a shill for the investment bankers. He would have become a legend if he had followed his gut and downgraded the Internet stocks in late 2000 instead of just sending out derogatory emails about his companies. Instead, he pulled stunts like downgrading the "sector" from "Strong, Super Dooper" Buy to "Luke Warm, Long Term" Buy on the day after Thanksgiving, when he knew no one (especially his underwriting clients) was paying attention.
Anyway, he makes some great points in the latest issue of Fortune about the nature of bubbles. It turns out that most people really don’t make insane decisions during the middle of a bubble – they make sane decisions given the circumstances.
"In the middle of a bubble (which until it bursts, don’t forget, is a boom), individuals, executives, politicians, central bankers, journalists, and others are confronted with hard choices. Sometimes their decisions are aggressive: I want to make money. Sometimes they are defensive: I want to keep my job. Sometimes they are emotional: I just don’t want to be wrong anymore. What these decisions are not is "insane.""
I think he makes some great points and shows that he is still the insightful analyst that made that historic call on Amazon. The article is well worth reading.