Plenty of elbow room could win it for Brazil
EVERY four years, teams of highly paid competitive individuals gather together and try to beat their international rivals. But this is not the World Cup. This is investment banks predicting who will win it.
Economists from Goldman Sachs, UniCredit and Danske Bank have crunched everything from per capita GDP and the rapid growth of emerging markets to the availability of arable land to come up with their winners and losers this year in Brazil.
“Although it may not be apparent when watching a football match, economic fundamentals play a vital role in determining who will come out on top,” said Lars Christensen, chief analyst at Danske.
The bank backed the US to get through the group stages at the expense of Portugal because of the US’s larger economy. Portugal may have the world player of the year in Cristiano Ronaldo, but it also has per capita GDP that is $30 000 (about R300 000) lower than the US. Likewise, the rapid growth of emerging markets such as Chile and Uruguay has chipped away at the advantage formerly enjoyed by Italy and Spain.
Goldman argued that the availability of arable land was correlated, albeit weakly, with appearances in the World Cup final. Countries with lots of wide open spaces, such as Argentina and Brazil, outperform small, crowded countries such as the Netherlands.
But the World Cup is not just about GDP and farmland. “Footballrelated factors are not to be ignored,” said Christensen.
Being cheered on while playing at home gave teams “close to a onegoal advantage”, said Danske, which is why it — along with Goldman and UniCredit — regard hosts Brazil as the favourites.
But whether the banks prove as successful at predicting results as Paul the Octopus remains to be seen. It managed successfully to foresee all Germany’s results in the 2010 World Cup in South Africa, whereas Goldman, sometimes nicknamed the “vampire squid”, predicted just one of the four semifinalists in the tournament.
Bookmakers have also gone with Brazil as favourites. But the banks insist the bookies have got it wrong on some of the other teams.
UniCredit recommended that investors go “aggressively long [on] Uruguay and Ghana”, who they say are underpriced.
A World Cup winner’s stock market can expect to outperform the global market by 3.5% in the first month afterwards, said Goldman. But this boon does not last: the market then underperforms by 4% the following year.
It is not just bankers who have turned their attention to the World Cup. Stephen Hawking, who normally spends his time pondering evaporating black holes, has focused on the gaps in England’s defence and determined a number of factors, such as scoring goals, that could affect the team’s already unlikely chances of success. His findings will strike a chord with fans used to seeing England fail to perform well in exotic locales. A rise in temperature of 5°C reduces England’s chances of winning by up to 59%.
This will bring little cheer to players set to take on Italy in their opener in Manaus in the middle of the Amazon rainforest, where the temperature often exceeds 30°C in June. — © The Financial Times, London