Same old Arsenal? The folly of forecasting!

Super-Thursday? No, it’s all about Super-Sunday!  The Brazilian Real might have hit a 12-year low against the US dollar last week, but the currency of Liverpool’s Brazilian wizard Philippe Countinho continues to strengthen. A moment of magic was the difference as Liverpool avenged their end of season defeat to a resilient Stoke side. Wild card status in tact! 

As for making football predictions, maybe I should have kept with my thinking on the futility of market predictions. After tipping Arsenal to win the league last week they ended the weekend bottom of the league, after two errors from the goalkeeper I predicted would help them end their pattern of capitulation. Now I know how the guys who predicted “DOW 36,000” in October 1999 must feel. Still, if anyone is going to make you look stupid, Arsenal are the kind of team that can do it.

The downfall for most forecasters in financial markets is when they buy into a belief that ‘this time is different’. They abandon tried and tested metrics and clutch to more obtuse reasons to explain their optimistic predictions. Have I fallen into the ultimate trap, thinking Arsenal have finally changed their ways? Yesterday’s display would suggest it is the same old Arsenal, but the league season is 38 games!

Interestingly, the odds on Liverpool winning the title have dropped circa 30% while the odds on Arsenal ending the season as champions have increased 25%. It is these types of sharp moves we see in the pricing of financial securities, as financial market participants react to new information, and extrapolate into the future. However, where speculators might only look one hour ahead, investors look one year ahead. No reason to panic in North London.