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The Risk Premium Factor: A New Model for Understanding the Volatile Forces that Drive Stock Prices by Stephen D. Hassett

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Chapter 10

Using the RPF Model to Translate Punditry

The varied voices of columnists, writers and sources in financial media are often confusing. This chapter summarizes a selection of recent articles from the financial press and analyzes them through the lens of the Risk Premium Factor (RPF) Model.

The Babel Fish was a fictional animal from Douglas Adams's Hitchhikers Guide to the Galaxy that performed translation between alien species. When you consider some of the statements you hear and read related to stock market value, which sometimes seem to be in a different language, investors might long for a similar translator. The varied voices of columnists, writers, and sources in financial media are often confusing. I believe this has many causes. While they are occasionally misguided, others simply focus on the wrong issues or oversimplify; some really get it and explain it well. This chapter summarizes a selection of recent articles from the financial press and then analyzes them through the lens of the RPF Model.

Note that many articles are written to present, not necessarily analyze, the point of views expressed by the subjects quoted in the articles. As such, the selections in this chapter are not meant to suggest that the authors erred in their analysis, but to focus on the themes expressed by the subjects, explain how their comments can be viewed through the lens of the RPF Model, and how readers can better understand how they relate to movement in the market.

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