As the World Cup fast approaches, another two large investment banks, UBS and Deutsche Bank, are deploying their crystal balls to predict who will likely seize the football world's Holy Grail this year.
Putting its historical origins aside, contrarian Deutsche, a German bank, predicts a win by England. In a tongue-in-cheek report entitled The World Cup Hacker's Handbook, Deutsche Bank Markets Research said that when it adopted econometric tools to predict football results, Brazil naturally came out on top, followed by Germany, Spain and France as the first cut of likely winners.
But to leave it there would be boring and too conventional, it added.
So the bank introduced what it called a selection bias and found that the history of World Cup winning runs suggests that England are among the teams that could win this World Cup, thanks to a large presence of Liverpool players.
"Narrowing it down, the record shows that every team that won the World Cup has gone on to either win another Cup or at least reach the final. The exception is England, which significantly tilts the odds in its favour... It is noticeable that the most well-represented team in the England squad is Liverpool with six players, this author's favourite club," Deutsche strategist Bilal Hafeez said.
Liverpool are the "most successful English club team having won more top-flight matches than any club (yes, including Man U); they have also won five European Champion Cups - more than any other English Club", he noted. The last time England had so many Liverpool players in the team, it won.
Deutsche said the "good value" trade is France with very long 25-1 odds of winning. Most of their players are in top European clubs and played key roles for their teams this past season.
The "insider tip" is Portugal, also with 25-1 odds to win. With Cristiano Ronaldo in goal-scoring form and a decent keeper, strong defence and solid midfield, there appears to be "no material defect in the team". The "long shot" is Switzerland at 100-1 to win, and a still respectable 3-1 just to reach the quarter-finals. They received a favourable draw and field a decent squad, with several players in clubs such as Juventus, Napoli and Bayern Munich.
UBS unequivocally sees Brazil as the most likely team to win the tournament this year, a sentiment echoed by Goldman Sachs in a report out last month. But UBS analyst Andreas Hoefert acknowledged that its model only goes so far.
In 2010, while its model did yield some fruit, Mr Hoefert said he was far less accurate than Paul, a two-year-old octopus from Sea World in Germany.
When asked to predict the outcome of eight World Cup games, Paul correctly forecast all of them, including the finals, he said.
On a more serious note, UBS said the World Cup also has political implications, especially for Brazil, where football passion runs deep but popular support for the event is at an unprecedented low. In a recent report, it cited a "heightened level of frustration (among) large segments of society with poor infrastructure, lack of public safety, high levels of corruption and an overreaching government".
Demonstrators in Rio De Janeiro last month carried a banner saying "A school teacher is worth more than Neymar". Neymar da Silva, a forward in the national team, was transferred last year from local club Santos to Barcelona in Spain for a reported fee of €86 million (S$145.6 million).
This "disconnect between the economics of football and the mood on the streets" is putting pressure on the national team's and the World Cup organisers' performance. "Failure on either front could shatter (incumbent President Dilma Rousseff's) hopes for re-election."
In addition, the electorate is much less likely to forgive the sums spent on the World Cup if their own home team fails to win the trophy.
But all this could be good for financial markets. Brazilian stocks have rallied in recent months as prospects for more market-friendly candidates have increased, UBS said.
This article was first published on June 12, 2014.
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