Blodget: Tech market can shake off its 'hangover'

However, its not all good news, he cautions that both share prices and levels of venture capital investment will continue to fall for many quarters yet before the money men start to regain their confidence again.

In Blodget's report, entitled Internet Financing: Where the Money's Going he predicts that those B2C players that survive into the summer will be well positioned for success. He writes: "By the middle of 2001, we believe the competitive position of the surviving, well capitalised companies will improve as they find themselves nearly alone in the market."

He puts Amazon.com, AOL Time Warner, eBay and Yahoo! into this select group.

The report also waxes lyrical on the reasons behind the 'dot-com bubble' which exploded so spectacularly last year.

However, the IT industry may wish Blodget was more introspective in his report and considered more closely his own role in the boom and bust, having made his reputation on being the loudest bull of 1999's bull market for dot-coms.

Blodget puts the damagingly artificial inflation of prices down to over-investment by venture capitalists, saying this created false demand for investment opportunities, services and IT equipment, driving up everyone's valuations.

This reached a peak at the end of 1999, with half of all investment in internet companies coming in the six months between September 1999 and March 2000.

Blodget now likens the current malaise within the markets to a bad hangover: "Hazy memories of questionable judgement, a splitting headache, nausea, and nagging feelings of regret."

Blodget himself became famous in 1998 when he set a $400 target price for amazon's stock. Amazon's share price now resides at $10.25. Merrill Lynch's legal department may also be feeling the pinch: Blodget was named in a $10m lawsuit from an investor who lost out after acting on his advice.