Back on Aug. 7, 2000, Foolish analyst Bill Mann offered some insights on infamous Internet analyst Henry Blodget. Blodget, like the industry he covered, reached his apogee in 2000 before leaving Merrill Lynch and settling a securities-fraud charge with the SEC. Famous for his prediction back in the day that Amazon (NASDAQ:AMZN) would reach $400, he recently outlined a scenario whereby Google (NASDAQ:GOOG) could plunge to $100. We felt that Bill's thoughts on this subject remained as interesting and useful as they were when we first published them.

Today [Aug. 7, 2000] is the day Henry Blodget, Merrill Lynch's star sell-side analyst, broke the Internet.

Not really. But Blodget, who made his name by throwing an audacious call on Amazon.com in 1998, followed through on his saber-rattling over the last half-year with a mass downgrade of the entire business-to-consumer e-commerce sector. Over this time, he has stated that some 75% of the sector's companies would be unable to survive the inevitable shakeout and consolidation, as hundreds of immature, cash-bleeding startups try to make the transition into operating entities.

So today, "Mr. Internet" followed through, warning that the 100% revenue growth of the past could not continue into the future, and downgrading 11 companies in the sector. Of these, eBay (NASDAQ:EBAY), 24/7 Media (NASDAQ:TFSM), and Safeguard Scientifics (NYSE:SFE) are currently cash flow-positive. The remainder -- DoubleClick, barnesandnoble.com, Buy.com, eToys, iVillage (NASDAQ:IVIL), Pets.com, Quokka, and Webvan -- are not.

Blodget stated that "the tide is no longer rising fast enough to lift all boats," a reference to his belief that most pure-play Internet companies will fail or be consolidated in the future because of slowing business, poor economics, and increased competition. Blodget also turned his back on the company that made him, cutting his estimates and rating on Amazon.com two weeks ago.

There are a few interesting things here. Looking at Mr. Blodget's record, it becomes quite clear that he completely missed the current downturn in his ratings of the companies he covers. Even with the recent downgrades, he still maintains "buy" or "accumulate" ratings on all but two of the 28 companies he covers. And of the companies he did cut this morning, his recent advice has been almost universally bad. The Foolish investor shouldn't care about "near-term" price appreciation (i.e., less than one year), but for someone whose influence is predicated upon his ability to make such calls, Blodget's record of late is abysmal.

For example, Blodget put a "near-term buy" rating on Pets.com on March 8, when it was trading at $7.50, just after its Merrill Lynch-underwritten IPO. Today, that company is trading at $1.15, 83% lower. Barnesandnoble.com has fallen 75% from its high, Buy.com 45%, and iVillage 75% -- all in a time when Blodget was warning of weakness in the sector without touching his rating on these stocks.

But analysts, just like everyone else, are really not that good at predicting short-term movements, so Blodget should be given some slack there. It's more troubling that he failed to publicly change his ratings on a group of companies squarely in the crosshairs of the larger factors he cites for upcoming industry weakness.

The other strange thing was his comment that the downgraded companies may be at seasonal bottoms, presenting a good buying opportunity, and that current setbacks may not be predictions of future weakness. Allow me to translate: "Now that these stocks have dropped 50% or more, I'm going to downgrade them, even though they might turn around soon." In farming, they call this "closing the barn door after the cow gets out." In finance, we call this "navel-gazing," or trying to look at where stocks have gone to figure out where they're going.

These prognostications are no help whatsoever to investors. Rather than being predictive at all, they are responsive. The analyst sees that a stock price has dropped and then cuts it. This is the polar opposite of how an investor should approach the stock market. A superior business model that has been hit needlessly by the market is the perfect buy. Of the companies in the list above, there are a few that qualify. It just goes to show that the best predictions are ones made about events that have already happened.

For related Foolishness:

Amazon.com and eBay are both Motley Fool Stock Advisor selections.

Fool editor John Reeves , who updated this article, does not own shares in any of the companies mentioned. For more details, flashback to our Fool disclosure policy.