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David Kostin

lines on the record: 29
first: 2025-12-04
most recent: 2025-12-04
sittings or episodes: 1
sources: podcast

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“Thanks, Alzin. It's been a pleasure to be Goldman Sachs for a long time and also my conversations with you among my finer memories. Thank you”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Think about the fact that there's an enormous breadth of clients that are out there. And you think about sovereign wealth funds and pension funds and insurance companies and endowments and hedge funds and mutual funds, all of whom are looking at a public market or a private market, venture capital or private equity that is approaching the challenge of getting returns in different ways. They have different horizons. They have different risk tolerances. And so that has made the job energizing and engaging. I traveled more than 100 days a year for more than a couple of decades. And all those different conversations are really what I will remember finally, and particularly my engagement with colleagues here at Goldman Sachs. So it's been an honor to be at the firm for more than 30 years and sort of lead my mark and then also transition to my successor, Ben Snyder, who I think will do a great job.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“So there's a general observations banal, if you will, work hard and things like that. And I think the important point for any business, and particularly Goldman Sachs, of a young person who's joining the firm, is to think about one's role and how that fits into the broader business environment. What I mean by that is if you understand where you sit and your contributions to the commercial process, then you can see how that changes over time. And as you see that change over time, you can see where are there opportunities to perhaps have a variant perspective on how to approach client problems. And I think that is not appreciated as much. Each person starts in a modest role because you're more junior generally, and you can observe a lot of senior people, but understanding how your tasks fit into a broader perspective is important and whether that is somebody in research, whether it's investment banking, whether that's trading, whether sales, I think that is an important perspective. And the second is to”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Abby Cohen, my immediate predecessor, really had a way of focusing on the economy, what the implications were for the equity market. Myself, I've perhaps moved the pendulum a little bit more closer to where Steve positioned it. And I was more”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“It has changed a number of important ways. The framework that we use is actually quite similar. Think about it in terms of the economy, earnings, valuation, and money flow. And I think about those as almost four legs of a table in trying to understand where the opportunities may exist. Is it an economic cycle we should be thinking about? Should we be thinking about earnings and margins? And what are the stress points different industry groups, valuations, where are there opportunities? And where's the money flow coming from? That framework has remained pretty consistent over a long period of time. And that was a lesson that I learned very clearly from Steve Einhorn, one of my predecessors. He hired me. There has been four equity strategists at Goldman Sachs in the last 55 years. During that same period of time, there's been nine senior partners and CEOs of the company. And so the four strategists, you had Lee Cooperman, really focused on stocks. Steve Einhorn looked at both a framework involving the economy and stocks.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Whether they're a group of companies that are more exposed to non US revenues or stronger balance sheets or certain attributes of companies. And investors have been trading those over time. That's increased in my client conversations. My costs are from assets to alpha. That existed before, but I think it's become ever more so as a trend. And so that's not something that is always appreciated or viewed, but I think that is something an important development over the last couple decades.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“My perspective, I think, about the arc of my career, it was very asset focused at the beginning of my career. And in fact, last evening I had the opportunity to have dinner with Eric Dobkin, a very prominent senior partner at Goldman, but he was the one who invented the equity capital markets on Wall Street here at Goldman. And he and I worked together on a number of equity offerings in the 1990s. And we reminisced around that. But the idea of assets and the asset value and what is a company worth, and how to think about that in terms of how investors will embrace a particular company has evolved. And while it's still important, a lot of the discussions that we have now are around alpha in the market. What I mean by that are the characteristics of individual companies. Companies can be collectively viewed as part of a basket. And we start to introduce this in 2006, which is almost 20 years ago, ways of trading not just individual companies, of course, but they may group those in certain categories.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely engaging with the clients. And that was the heart of what we try to do at Goldman with our investment research to engage with some of the leading investors in the world.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Tell if he was agreeing or disagreeing or what he had on the short side of his book. That was a series of those meetings that really stand out. And the third classification would be mutual fund managers. And there, I have a lot of meetings with Don O'Neill, who retired after 40 years at the Capital Group. And the meetings there were always about the longer horizon and what happens if X development takes place and how do you think about that? And our analysis, we had some nearer term views, longer-term views, but he would really challenge my thought process to expand. And so when I think back, Allison, the client meetings, that is the best part of the job, in my opinion, to engage with fund managers of all types and some of the research they would ask us to do some customized projects for them, which really gave a lot of enjoyment to the job over many years.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“And he was always thinking about what were the implications for the rates market, the currency market, the commodities market, as he would think about other ways to implement some of our views or some of our insights into equities and how does he play that across in other areas. So I thought that process and over the many years had a chance to interact with him and other macro investors as well. That was an interesting way for me to learn how other people incorporate our analysis. Another approach with the hedge funds. They engaged single stocks much more specific, more tactical in nature. And I have a particularly strong memories with a number of meetings with Jim Parsons at Junto Capital, where I would go in, we did the analysis of the positions that were published on the long side of his portfolio. We would go in, we'd say, Jim, I think you should be selling these stocks. You should be buying these stocks. And we would have a very intense dialogue over an hour and a half meeting. And he has an amazing poker face. So I could never.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“So there are, I mentioned earlier, George throws in his book The Alchemy of Finance, the opportunity to go see him and discuss that. His insights came from an analysis of real estate securities, and I was the real estate analyst. I had reason in 2015 to fly to Omaha, Nebraska to meet Warren Buffett, and I had another reason 24 years before that I met him in 1991. So I met in 2015. Of course, there were reasons why I would remember the previous meeting. I was shocked that he also had remembered that his memory was extraordinary. And he asked a lot of questions. I would say, Allison, there's sort of several meetings and client types that resonate with me over time. And it was the way that those fund managers engaged with our research, my research and the research of the rest of the team. And so one is from a macro perspective, Paul Jones. And the way he would engage with my analysis on the equity market.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Was the rise of raising capital in the if a real estate was an enormous driver of that? One of my iconic memories for the time I joined is there used to be a vice president's dining room. Everyone was in 85 Broad Street, single building, small building, old. And they had a vice president's dining room, which was available. There was no internet. So you had to call up, make a reservation. Maybe you could seat perhaps 100 people, maximum, and you would be able to go through a line, get some food from 12 to 12.45. That was one seating, and then they would flip the lights, and you had to leave. And then there was another seating from 12.45 to 1.30. And so that was an iconic memory I got to use that three times because it closed at the end of the year. There was no cafeteria. There was no gymnasium. There was no health unit. It was a traditional office building. But there was this area that you could sign up for. Occasionally we took that opportunity to have lunch together. It was a great opportunity as well to meet other people, but I only got to use it three times.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“My first day at Goldman Sachs was a very eventful day in the history of the firm. Not because I joined, but because on September the 12th of 1994, my first day in the job, I started in the morning, and that evening the senior partner resigned or retired. That was Steve Friedman, and that was a very difficult year for the firm. The Federal Reserve hiked interest rate seven times. The Fed funds rate went up two and a half percentage points from three to almost five and a half percent. Tenure yields went from 6% to 8%. S&P 500 return that year was around 2%. It was a very difficult time for the firm. It had an enormous set of layoffs. So I absolutely remember my”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Think about investor being compensated for the potential above average expected volatility, which would be associated with a narrow concentration market. But that is not the case. The idea is the market trades at a very high valuation. Right now, the S&P 500 trades around 23 times forward earnings. That's a pretty high, historically high valuation, not the highest, but pretty close to the highest level. In 1999, it was 24, 25 times as an index. So it's very high versus history. Margins are very high. Now they could continue to increase. That is a possibility. I think that is probably less likely. So therefore, the risk would be that you have potential multiple contraction over time. So earnings will grow. Valuation comes down. And I think the valuation is likely to lead to high valuation today, lead to a below average, still positive, but below average return in the next 10 years. Of course, I hope it's a really strong return.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“The Goldman Sachs portfolio strategy team has recently published, not just a year ago, most recently, published a forecast for the returns for the S&P 500 over the next 10 years. There is a range between 3 and 10%. Annualized total return, midpoint of that is around 6.5%. And it is my belief that we're probably going to be on the lower end of that distribution. It's number one. Number two, that is a return that is still positive, but it is below the long-term average. And one of the reasons for that, in my opinion, is the starting point evaluation is high. And most importantly, my concern remains around the concentration in the market. And the way I think about it is as follows, that there is high concentration, and in a high concentration portfolio, one would expect a greater level of prospective volatility than a broadly diversified portfolio. And normally you would”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Of what they can charge in the future. There's a significant amount of concern, and that's reflected in some of the conversations we have with investors, but they're still owning those companies for as long as they keep generating those earnings.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Well, the largest stocks in the market are comprising right now around a third of the index. The idea of not owning those stocks would be sort of challenging. Huge amount of risk in order to avoid those. So they tend to own those in a meaningful way. The mutual funds are underweight those stocks relative to their benchmark. Otherwise, it'd be too concentrated and violate some of the rules on what constitutes a diversified mutual fund from the perspective of the SEC. And so they tend to be a little bit under-allocated to the biggest stocks, but the hedge funds are definitely still embracing those companies, which have had terrific performance. They are growing. They're earnings more rapidly than the rest of the market. I think that's an important driver of their returns. They're investing huge amounts of CapEx, and that's really the story behind the AI buildout. And so there's a lot of enthusiasms around that. As I said earlier, I do not believe there's a bubble in the public markets for the AI securities. I think there is a lot of concerns around the commoditization of those products, what is the pricing dynamics.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Cohort on the higher income cohort benefiting from a lot of the rise in the stock market, that middle income, sort of the companies that are benefiting from that. And the third would be some of the AI beneficiaries that there is a lot of focus on beneficiaries, particularly on the revenue side. Almost all the discussions around AI tend to be around companies that are looking to improve their margins, lower their cost, and raise their margins, which is important, but a relatively few number of companies have actually focused on really concrete examples of how they're using AI to drive their revenue growth. And I think that is what fund managers will embrace and will be rewarded in those share prices. I think those are three areas, healthcare, some of the consumer areas, and some of the perceived long-term beneficiaries of AI.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“It's difficult not to own some of the biggest stocks in the market, and that is the performance that has been the story for this year. I think the opportunities that people are looking for fund managers, healthcare, statistically, cheapest in 30 years on a relative basis. And the idea relative to the rest of the market, relative PE multiple. And as the uncertainty around some of the healthcare policy perhaps recedes, there is an opportunity from a value perspective in some of that defensive sectors and healthcare example. Second area to focus on or clients are looking around right now is on the consumer retail, a lot of concern about the state of the consumer, both an income perspective and from employment and unemployment. But the Goldman Sachs Economics team is looking at the sort of middle income component of the economy, that there is actually some stability and some growth. There'll be benefits next year for some tax reform that will kick in. And so a lot of concern around the lower income strata of the United States, wealthier.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“You can think about it in terms of the So, those are the sort of measures that you think about. And that's typically around 37%, a greater percentage of mutual funds typically outperform than is the current situation here. And if you think about hedge funds are up around 12% year to date, and that's compared with the S&P 500 increase around 17%. The market itself has done pretty well. Hedge funds and mutual funds have struggled on a relative basis in this environment, which has been so driven by the AI trade. I think the uncertainty and the volatility that occurred around the liberation day in April put a lot of investors in a challenging position as the market sold off a lot. A lot of funds did not increase their position, their gross exposure as the market was rallying pretty dramatically in terms of their rebound from the lows this year. I think that's been the challenging story for a lot of fund managers.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“That's a critical distinction between the public markets and the private markets and AI. And there's the number one question that we are getting asked by investors really for the last six to eight months and a concern about it. And I think important to break it into the two pieces, price and capital availability in the public and the private markets.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Integral part of the valuation of the shares. That is a differentiated view. It's thinking about momentum, the relevance for private market for AI is that as these firms are raising capital, the growth rate increases. As the growth rate increases, the valuation of the enterprise increases, and that is a recursive process, reflexivity is what George Soros called it. And that continues as long as there is new capital that can be brought into the market. But the experience in 1999 was that at a point in time when the growth cannot be sustained or may not be sustained, you have a recursive or reflexivity coming lower. The so-called circular financing, I think there are two different issues. One is the nature of reflexivity, and the second is the idea of capital being funded through vendor financing. At some point, the vendor doesn't necessarily have the same growth to be able to fund that growth.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“In the public markets, but not necessarily buoyant. It's there, but not so dramatic. I think there's a much different story in the private market for AI. And I think that's important insight that really came from George Soros in his book, The Alchemy of Finance, the Alchemy of Finance was published in 1987, and George Soros laid out his theory of reflexivity, which was linked to an important insight into how the capital markets trade. He had chapter one on reflexivity, the equity market, chapter two, reflexivity in the currency market, chapter three, reflexivity in the bond market. Now, what is that reflexivity about? Most people think the valuation of an asset is the discounted future value of the cash flows. George Sorrows argued in the Alchemy of Finance that is not the right way to think about it, that actually the valuation of the shares today, the price change.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“AI is not a bubble. It sort of matched the earnings growth and the price. Can think about the valuation of the largest companies in the market. Many of those associated, of course, with AI. They trade around 30 times earnings. Largest 10 companies in the market traded 40 times earnings in 2021, just after coming out of COVID. And in 1999, the 10 largest stocks traded at 50 times earnings. So 30, 40, and 50. So you would say that we're not necessarily in a price bubble, if you will, an absolute basis, still high relative to history, but not nearly what it has been at other periods of time. And you can think about the capital availability in the public markets. We've had about 55 IPOs in the United States this year, 55 deals greater than $25 million in capital raising. You had $280 deals or so in 2021. That was a very robust raising of capital in the iPhone market. And you had nearly 400 deals in 1999. This is an example where there is capital.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“The most frequently asked question from investors all over the world has been Are we in an AI bubble? And that is, I think, an important answer to that in two ways. The first is it's not a single market. There's a market for price, and there's a market for capital availability. Those are two markets. They exist both in the public and the private space. So if you take that analysis and think about it, it really has two implications. One, we are not in an AI bubble in the public markets, and I believe in the private markets, the availability of capital and the price is probably unsustainable, which one could take as a synonym for a bubble. And I think the way to think about it is as follows. In the public market, NVIDIA, which is the company that people most associate with AI, share prices increased by 12-fold in the last three years, and earnings have increased by 12-fold as well. So pretty much the price and the earnings have matched each other. That'll be one exhibit, one example of where the price in the public markets, if you will.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Nervous SNIS comes from uncertainty, and uncertainty is a form of risk and risk in the markets as measured by volatility, which is the VIX. And so the risk has been a lot of concerns on the part of investors, but I think that has been largely dissipated. We had a very strong third quarter earnings season, which I think was an important stabilizing factor in the market, in my opinion. You had pretty good results, not just from the Magnificent Sevens, but really a broad array of companies in the market increasing earnings up almost 9% year over year. And I think that's a pretty important stabilizing factor in the market right now.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“Actually, the start of the year, the assignment was pretty optimistic. And then, of course, Liberation Day on the 2nd of April really create a lot of havoc and volatility increased dramatically, but that has receded in the last couple of months. And in fact, the market had a pretty monotonic increase, pretty steady increase from the low in April. And it was only recent when the government data stopped being released that had a modest increase in volatility. But I think the story of calendar 2025 thus far has been actually volatility has been right in line with the last five years. The VICS measures around 19 and it's actually trading a little bit below that right now. And I think that bodes pretty well looking into calendar 2026 in terms of the setup for the market.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“I am going to miss you along with many other colleagues here at the firm. But I'm going to be an advisory director in county year 2026, so I'll be interacting with some clients and other internal people. So we'll have an opportunity to see each other. But I've had a great experience for the last three decades.”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT
“20 plus percent forecast for stocks next year. That's courageous. A lot of people like to come out with 8 to 12 and, you know, that's what they come out with. What makes you so confident?”
2025-12-04 · Goldman Sachs Exchanges · From Assets to Alpha: David Kostin on US Equities · IDENTIFIED FROM THE TRANSCRIPT