Betting on Brazil

By ColumnsFOXBusiness

During the 2010 World Cup in South Africa “Paul the Octopus” became an unlikely star, not as an eight-armed goalkeeper but as the cephalopod who correctly predicted the outcome of eight matches.

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Sadly Paul is now swimming in that great aquarium in the sky but another prognosticator once famously described as the “great vampire squid” is making its own predictions of which country may win soccer’s biggest prize of all and reap the ensuing economic benefits.

With the World Cup in Brazil just weeks away, the eggheads at Goldman Sachs have been pouring over World Cup soccer statistics and global markets going back to 1974, figuring out if the winning country can expect a nice bounce in its stock market performance.

In short the answer is yes, but it appears the positive impact doesn't last very long and Goldman concludes that the winning nation will often see its stock market actually underperform by around 4% in the year following the final.

As for the country that loses in the final? Expect an immediate "bout of the blues."

But it’s not just the economics of the World Cup that the investment bank studies; Goldman also takes a stab at predicting who will actually win the big tournament.

Of course, the financial “experts” at Goldman never saw the big economic crash coming in 2008, so why should we have faith in their ability to predict the outcome of soccer games?

The investment bank actually uses a complicated statistical model based on historical data and mathematical computations that would make Pythagoras’ head spin. It also tabulates the results of international matches going back to 1960.

But statistics completely ignore the “human” element that plays such an important role in the high-pressure atmosphere of a World Cup competition.

There’s also heat, altitude, bad referees, angry wives, food poisoning and team fitness to consider, but the report does at least give some consideration to whether a team is playing in its home country or its home continent.

With all that said, what are Goldman's predictions?

Well it sees Brazil, Argentina, Germany and Spain as the four semi-finalists.

And it calculates a 48.5% chance of Brazil lifting the cup, with a 14.1% chance of Argentina being victorious. If it’s accurate, they’ll be partying on Copacabana beach for months.

What about the chances of my native England, whose only World Cup success came in 1966? A paltry 1.4%, and frankly I think that’s being generous.

So for investors who like to crunch the numbers and believe in history, Goldman Sachs says you may want to consider a short-term investment in Brazil’s stock market.

I wonder if Paul would agree.

The 32-country World Cup kicks off in Brazil on June 12.

What do you think?

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