For all the ink the media spilled on Analystgate, either to lionize Eliot Spitzer or to vilify Henry Blodget, there's one topic the media has yet to fully confront, even after all these years -- its own role in inflating the analyst bubble. Blodget the analyst could never have become Blodget the celeb without a media hanging on and amplifying his every call; Mary Meeker was crowned "Queen of the Net," not by Wall Street or Morgan Stanley, but by Barron's.
We were reminded of this ancient history last week when we came across this nugget tucked inside a story in Financial Week on longtime banking analyst Richard X. Bove. A couple of weeks ago, Bove "issued a memo to media representatives stating that he would no longer make his research available to them or return calls to reporters because on 'news days' he was routinely fielding 30 calls or more from the media."
Thirty? Are there even 30 journalists covering banking?
Clearly, a couple of things are going on here. Bove plies his trade at tiny Punk, Ziegel & Co. -- a media plus in these post-Spitzerian times, when analysts at the biggest firms are far less likely to talk to the press. And he has bold, straightforward opinions. Bove urged investors to get out of big brokerage stocks in July, predicting credit market problems would soon come home to roost. More recently, he has turned bullish, engaging in the kind of about-face of which the media can't get enough. "There's a need for strong points of view in the market," Bove tells Financial Week. "If [CIBC World Markets analyst ] Meredith Whitney says Citigroup is going to cut its dividend, or I say the financial crisis is over, it helps people crystallize their thoughts."
Ah, Whitney. We're glad Bove brought her up, since she, perhaps more than he, has emerged as the media's analyst of the moment. CNNMoney.com dubbed her "the Jeremiah of the financial crisis," while Maria Bartiromo gushed in a February BusinessWeek column that "the red glow you see on Wall Street is the hot hand of Meredith Whitney." But the analyst really hit media pay dirt April 2, when she was quoted on page A1 of The New York Times in its story on credit woes hitting European banks.
What Whitney and Bove have in common, aside from working at smallish firms -- Whitney is with Oppenheimer & Co., which acquired CIBC's U.S. equity research unit in January -- is that they correctly called the banking crisis last year. Whitney's big moment came in the fall when she issued a dim outlook for Citigroup that proved prescient -- and shaved 360 points off the Dow. Her fame was enhanced when that call reportedly led to death threats and her husband, professional wrestler John "Bradshaw" Layfield, canceled a trip to protect his wife in New York.
Unlike Bove, Whitney remains unabashedly bearish, making the pair something like the market's Siskel and Ebert. For the media, they are akin to seers, as if one good market prediction naturally leads to others. We're not arguing that Whitney and Bove aren't solid analysts and won't continue to make good calls. But what their celebrity demonstrates is even in these post-Blodget times, the media can't stop itself from annointing the next stock picker or market caller extraordinaire. Alas, this tends to end badly, as one cycle's seer becomes the next's dunce. Just ask Elaine Garzarelli.
Or Blodget or Meeker or Jack Grubman, who, conflicted or not, were right until they weren't. Blodget was the topic of a recent redemption piece on BusinessWeek.com by the magazine's Roben Farzad. While many commentators expressed disgust that Farzad is now a fan of the disgraced analyst, we were taken aback by Farzad's opening admission about owing a "debt of gratitude" to Blodget.
"In 2000, when I left Wall Street to be a business writer, castigating him won me instant cred with readers," Farzad explained. Put another way: Jumping on the Blodget-bashing-bandwagon helped Farzad advance his career. In other words, being a lemming paid off.
Now the lemmings have moved on. Their next trick: the inflation of Bove and especially Whitney, who will ride that Times page 1 appearance. But Whitney, for one, realizes, even if the media does not, that her 15 minutes won't last forever. "People are starved for good research and I'm consumed by all of this," she told Bartiromo in BusinessWeek. "I'm not getting a lot of sleep, but you've got to strike while the iron is hot."