Was David Kosten, the chief equity strategist at Goldman Sachs, grandstanding, trying to support a position the firm had or was it merely the worst and most public stock market call any chief equity strategist has ever made.
During the summer of 2012, Mr. Kostin made a very public and demonstrative market call. Mr. Kostin said that the stock market was going to fall precipitously by the end of the year and that investors needed to get out of the market. The stock market This strong and very unequivacal statement cost his clients which lost his clients many millions of dollars.
In August Mr. Kostin said that the stock market would fall 12% by the end of 2012. He was calling for a pullback in the S& P averages from the current 1400 level to 1250 by the end of the year. He wrote, “We believe the uncertainty is greater this year than it was 12 months ago.”
On September 7, 2012 Mr. Kostin reitterates his view of a 1250 S&P average by the end of 2012. The averages were at 1437 at that time. He then went out on the unprecedented limb of stating that investers should get out of the U.S. equity market by Sept. 14,2012.
On Sept. 14th 2012, CNBC reports that David Kostin, Goldman Sachs’ chief U.S. equity strategist, has written to clients “pleading” with them to remove their assets from the stock market.
The operating principal was that the United States was looking at a 12 percent drop in stock market averages because Congress would not address the necessary issues regarding the nation’s solvency.
Kostin cited lack of action regarding taxes and the nation’s debt ceiling.
Now while this was a common philosophy at the time, Mr. Kostin took his belief to extremes to the detriment of any of Goldman sachs clients who followed his advice.
Since Mr. Kostin had exposure on many business and news venues, many other investors quite probably heeded his warnings and cashed in their equity positions.
This is not a post intended to embarrass Mr. Kostin, but a notice that these kinds of egregious unequivacal recommendations do not go unnoticed.