City bankers will bet on raindrops running down a window pane, but they can't beat the bookies

Midweek View: Goldman's 'The World Cup and Economics 2014' is a veritable tour de force of mind-boggling analysis

Have you had a bet on the World Cup, the City guy asked me. When I said I hadn’t, he looked perplexed. “I’ve got a grand on Brazil to win, and £500 on Argentina,” he said. His calculation, apparently, was that Brazil were the clear favourites, at 3-1. But if they did not win, he really could not see anybody else other than Argentina picking up the Jules Rimet Trophy. With the odds on Argentina not dissimilar from those for Brazil, he was reckoning on covering his money.

All his City mates, he said, were having a flutter. Judging by his own wager, and the casual manner in which he discussed it, they must be staking equivalent sums.

 The guy knows his football – or rather, he thinks he knows his football. It’s the same across the City – everyone has gone World Cup mad. Forget the markets: Robin van Persie’s diving header, Lionel Messi’s stunning dribble, and Raheem Sterling’s goal that never was are dominating the conversations.

The City boys, though, are not content with just enjoying a pint and watching matches on TV. They like to have some skin in the game, to add a bit of spice, to make their time, even leisure time, financially profitable.

It’s the same with golf. I can play with non-City mates and the loser buys the drinks; but join a four-ball of Square Mile high-rollers and the stakes can be far higher. Instead of having a pleasurable 18 holes, I’m reduced to a quivering wreck, wondering how I will explain the possible enormous loss to my wife. As a result, I’m barely able to play – a bag of nerves, worrying about every shot, shaking over each putt.

Twice though, I’ve played with some off-the-scale fat cats who were having side-bets, the size of which they clearly judged to be off-limits to me. How did I know this? Because on each occasion they said words to the effect that they were having some “additional fun”, but they did not expect me to join in.

The first time was with a pair of well-known City figures at the Royal Mid-Surrey club. The victor won easily, but then the other golfer suggested they make it “double or quits” when they were due to play again, at Sunningdale. If I had to guess, judging from overheard snippets in their conversation, they were playing for £5,000.

On the second occasion, the match ended in a draw. It was me and one of the super-rich guys versus two of his pals, at Wentworth, on the West Course. It only finished all-square as I blew up on the last, my partner having hit his ball out of bounds. We were one up with one to play, and he turned to me and said that all I had to do was half the hole to win.

Instead, I took a nine, a quadruple bogey, and we lost. The four of us shook hands, but my team-mate could not speak. He stormed up the hill to the clubhouse, and was so upset that he did not appear in the bar for ages. Judging by his furious demeanour, and the grins on the other guys’ faces, he’d been set to collect a small fortune – only for yours truly to make it disappear.

Over a few drinks, the permanent City speculator who is never far away can soon loom into view. I’ve seen traders bet on rain drops running down a window. On the golf course, I’ve witnessed money change hands on whether someone can hit a particular tree from 200 yards (he failed). Back in the City, they will stake hard cash on the colour of the Chancellor’s tie on Budget Day, the exact length of his speech or how many times he says a certain word.

One evening, I played table-tennis with two bankers. At first I thought they were speculating on the outcome. Wrong. They were gambling between themselves on the close of the Dow in New York.

At a City charity dinner, I saw a diner peel off some notes and hand them to another. It turned out they were having fun predicting how much one of the auction lots would raise. And I haven’t even mentioned horse-racing.

Occasionally, firms try to capture the mood, to cash in on the fixation. One of the most entertaining reads to emerge from the mountain of literature devoted to the World Cup comes from Goldman Sachs. A few weeks ago, the economists in the mighty bank’s investment research department turned their gaze to Brazil. The resulting The World Cup and Economics 2014 is a veritable tour de force of mind-boggling analysis.

On average, for example, in the month when a World Cup is played, the Italian stock market is 2.5 per cent lower than the previous month. But in July 1982 and 2006, the months when Italy won the Cup, the market actually rose – up 3 per cent month on month. So if Mario Balotelli and co win, pile into Italian stocks. Says Goldman: “History suggests that if the Azzurri beat the odds, buyers of Italian assets will also cheer.”

For those following the Dutch team, they should keep an eye on house prices. If they’re down, the performance on the pitch is also down; up, and the Netherlands are winning again. Goldman reckons that “the recent stabilisation in the Dutch housing market suggests the worst is behind Dutch football”. But all things are relative, and Dutch house prices continue to lag behind those of Germany, suggesting that “that the prospects of Netherlands beating Germany and reaching a fourth final is far from imminent.”

What of England? Goldman quotes Bill Shankly’s famous observation that football isn’t a matter of life or death – it’s more important than that. “By contrast,” writes Goldman, “economics is rarely, if ever, more important than life or death. So it must follow – as a matter of logical deduction – that football is more important than economics.”

To prove their point, they look at 1966. “Pretty much every English man and woman knows England won the World Cup in 1966. How many know how the economy performed that year? Not many.” In fact, 1996 “was a year of relative underperformance for the economy – sluggish growth and rising unemployment”. Goldman concludes: “In the (unlikely) event England win the 2014 World Cup, we doubt many in 2062 will remember if the economy performed well or badly this year, but they will all remember the World Cup. Business cycles come and go, football is forever.”

My man with the bet on Brazil followed by Argentina would be encouraged by Goldman’s study. Based on scrutinising the entire history of competitive international matches since 1960, and building in additional factors such as home advantage (worth an extra 0.4 goals per match) and home continent advantage (no European side has ever won a World Cup held in the Americas, worth 0.2 goals per game) Brazil should win hands down.

Next likely to win, but by some margin, is Argentina, followed by Germany. Goldman writes: “It is hardly surprising that the most successful team in football history is favoured to win a World Cup at home. But the extent of the Brazilian advantage in our model is nevertheless striking.”

Goldman even takes on the bookmakers. Their analysis gives Brazil an almost 50 per cent probability of winning, versus Ladbrokes’ 25 per cent.

But before my man with the bet gets excited and begins rubbing his hands at the prospect of a juicy pay-out, he should take heed. As I write this, of the 14 group matches played so far, Goldman has called just five results correctly. The rest it has got wrong. Move to score-lines and Goldman fares even worse: just one score, Argentina v Bosnia-Herzegovina, is forecast correctly.

And the Goldman model would have failed to pick the last World Cup winner. It would have predicted Brazil to win, when in fact Spain were victorious.

We should not be surprised. Not for nothing does the old joke tell us: God invented economists in order to make astrologers look good.

Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
News
newsMcKamey Manor says 'there is no escape until the tour is completed'
Voices
Hunted: A stag lies dead on Jura, where David Cameron holidays and has himself stalked deer
voicesThe Scotland I know is becoming a playground for the rich
News
people
PROMOTED VIDEO
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
News
Shami Chakrabarti
people
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites Star Wars 7 rumours
Sport
football
News
news
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker