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7 economists and finance experts give their Melbourne Cup tips

Melbourne cup economist predictions. Source: AAP
Melbourne cup economist predictions. Source: AAP

In offices around the country, colleagues are putting in their tips for the office sweepstakes. Some pick based on name, others on the jockey’s colours, others on history and others on what their taxi driver suggested on their way to work.

If you’re in the financial services industry, it’s likely you have more powerful data to back your decision up.

Also read: 4 property investing tips for a volatile market

So, we asked seven experts to ask who they’d back come 3:00pm today.

These were their responses:

Stephen Koukoulas, Market Economics: Rostropovich and Runaway

The Melbourne Cup is arguably the toughest race of the year for form and therefore to make a tip with any confidence. About half the field are foreign invaders and have little local form to speak of, only their reputations. For the local horses, the tough slog to qualify for the Cup can leave them a little ragged, so there are more than the usual amount of risks.


But that has never stopped me spending a lot of time trying to sift the information and this year it has come down to one foreign raider – Rostropovich, a 3 year old with little weight; and one local, the Gai Waterhouse / Adrian Bott trained Runaway. They look the two for me, although if it does rain, beware of Magic Circle.

Mark Bayley, head of institutional fixed income at FIIG Securities: Yucatan and Cliffsofmoher

The best way to perform in the corporate bond market is to avoid the defaults and in this current volatile financial climate, I recommend investors position portfolios defensively.

This coupled with my hopeless lack of horse racing knowledge, means that I’m sticking close to the favourites. Yucatan and Cliffsofmoher – both are Irish raiders that will appreciate the forecasted rain and cooler weather. I’ve also been on holiday to both places and had a fantastic time; hopefully by backing both, you will too!

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Eleanor Creagh, Australia market strategist at Saxo Capital Markets: Youngstar, A Prince of Arran and Magic Circle

In selecting Melbourne Cup bets, I prefer to remove emotion and bet logically and rationally based on controlled outcomes of systematic models and statistical relationships.

My approach to financial markets and equity markets is similar using systematic strategies, statistics and a fundamental discretionary overlay at times.

Bayes’ theorem, a mathematical formula based on conditional probabilities, can be applied to the outcome of a horse race, assigning probabilities for each horse winning based on information related to the race and horse rather than gut instinct.

These probabilities are then adjusted based on likelihood ratios. On this basis the Saxo favourites are Youngstar, A Prince of Arran and Magic Circle.

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David Bassanese, chief economist at BetaShares: Ventura Storm

History suggests that backing a favourite is not ideal from a risk-return perspective in the Melbourne Cup. This likely reflecting herd mentality mis-pricing, where too many punters are keen to be seen among the winners rather than take a better value longer-odd bet.

In balance risk and return, my call is Ventura Storm, which has proven ability in the wet and good recent form at a heavier weight than he’ll carry into the Cup. He’s also drawn well in barrier 7.

Sarah O’Carroll, Editor-in-Chief at Yahoo Finance Australia: The Cliffsofmoher and Finche

Every time I place a bet on a horse I’m convinced I’m going to win.

But I have no business being so confident because it’s neither form analysis nor statistics that inform my choice.

My approach is simple.

First, I pick an Irish horse – because I’m Irish. This year I’m going with The Cliffsofmoher. Named after one of Ireland’s most stunning natural landscapes, sure it will be equally a thing of beauty to see this horse cross the finish line in first place.

Second, I look for a sign. A horse with a name that means something to me, or links to a recent event. And there it is – Finche. An obvious choice. Last week we launched our new series, The New Investors, and one of our New Investors is Shahirah Gardner. And she founded a company called Finch. (Slightly different spelling). If that’s not a sign, I don’t know what is.

Between the luck of the Irish and that clear sign from The New Investors – I’m convinced as always that I’m on to a winner.

Evan Lucas, chief market strategist at InvestSMART: Marmelo, with an each way go at Youngstar

[Yahoo Finance note: This is a summarised version of Evan’s 804-word analysis.]

Using my weighted quant model, I have looked for quality with deep value in this year’s race.

One quant variable you can never truly factor into the ‘race that stops the nation’ is Melbourne’s weather. However, the good people at the Bureau of Meteorology have revised down their rain forecasts from 5-15mm to 1-5mm in the 24 hours before The Cup. This means the momentum values given to the European Raiders over the past week have been reduced as it looks like come 3pm AEDT we will have a Good 4 all things being equal. This is the base feed for my quant on track conditions.

We want value, and as a value investor, this year’s Cup is one of the more open and deep value races of the past decade. This is exciting.

Marmelo at $18 is interesting value. French form is good with 2 wins over 2800m and 2 places over 3000m, so his staying power is there. Marmelo’s barrier is a plus, at 10, as is his weight, at 55kg. The knock is the poor form he has shown in Australia over the last year, including a poor finish in the Cup last year. This one is a big value chance, and the Model has it in the top 5. (My personal value pick.)

Youngstar at $19. She almost got Winx in the Turnbull Stakes, which was a beautiful race, and she was still running, telling of her great staying power. Drawing barrier 8 means she will get a nice run into the first turn, and with no weight (51.5kg), there is excitement here. Model credits her Caulfield run as she threw a shoe (and yet still finished 7th). It does flag her young age, as this a very hard race for a 4-year-old horse to win. Model flags her as deep value. (I see an each way play here.)

Good luck all!

Saul Eslake, independent economist: ‘I barely know one end of a horse from the other.’

Ha! I lived in Melbourne for more than 31 years without ever once going to a horse race. I can proudly say I barely know one end of a horse from the other. Have never made a prediction for the winner of the Melbourne Cup (or any other horse race) and am not about to start now.

From a professional standpoint I’d note that if a horse is any good, it is ‘weighed down’ so that it can’t win, so the Melbourne Cup is more about gambling than it is about determining which is the best horse (note – Winx has never been entered in the Melbourne Cup). Not that I have anything major against gambling – or frocking up and having a good time – just not personally interested myself.

Gamble responsibly.