This podcast is a great listen, as it deals with the economics of Investment Banking and how firms such as Goldman Sachs make money, from the perspective of long-time financial analyst Marc Rubinstein. It is interesting to hear Marc discuss the volatility/cyclicality of the industry, as well as the remarkable size (and influence) these firms have. Marc considers return on equity to be the most important metric when valuing an investment bank, whereby Goldman Sachs has a 14-16% annual target.

"Think of it like a bond. It's giving you, let's say, 15% a year return on your equity and you're required return on their equity is, let's say, it's 10%. That might be a function of risk, but let's say it's 10%. Therefore, thinking of it as a bond, what should that be worth? 15 over 10, 1.5. And so, the kind of heuristic that has persisted for many, many years valuing this space is to look at a price to book, which is a function of the degree to which the firm generates a return on equity over its cost of equity. That works for Goldman Sachs right now.”