After what seemed like a lightning-fast NFL season, the Super Bowl is almost here.

It seems like a compelling matchup, especially the defense of the San Francisco 49ers versus the offense of the Kansas City Chiefs.

Unfortunately, sometimes the only saving graces for far too many unexciting Super Bowls have been the halftime entertainment, nachos and wings, those ubiquitous 100-square office or party pools, and—of course—the commercials.

Major advertisers and their agencies pull out all the stops in terms of production values and budgets for these commercials. The media cost for a 30-second spot in Super Bowl 2020 is estimated to reach $5.6 million, and commercial production costs can easily exceed $1 million, especially if celebrities are involved.

Many people find the commercials more entertaining than the game itself. Some of the all-time greats include Apple’s “1984,” which introduced the Macintosh computer in movie-like fashion; Coke’s commercial featuring “Mean” Joe Greene; any number of campaigns for Budweiser and Bud Light (including those starring the Clydesdales); VW’s “The Force” (which includes a young child as Darth Vader); Wendy’s “Where’s the Beef?”; Monster’s “When I Grow Up”;  McDonald’s “Showdown” (with Larry Bird facing off against Michael Jordan); Pepsi’s “Your Cheatin’ Heart”; and the Snickers commercial starring Betty White. There are many more Super Bowl commercials worthy of mention, and lists abound ranking them.

One of the more prolific advertising agencies involved with Super Bowl commercials has been DDB Worldwide, originally known as Doyle, Dane, Bernbach. While DDB has created Super Bowl commercials for many clients, they are probably best known for their Budweiser and Bud Light campaigns, including several of the Clydesdale spots, “Spuds MacKenzie, Party Animal,” “Whassup?,” “I Love You, Man,” and the croaking frogs in a pond rhythmically repeating “BUD-WEIS-ER.”

DDB is currently celebrating the 70th anniversary of its founding in 1949.

The driving force behind the agency’s success, Bill Bernbach, became one of the leaders of the “creative revolution” in advertising in the 1950s and ’60s. The agency was known for its groundbreaking work on the “Think Small” campaign for Volkswagen, “We Try Harder” for Avis, Polaroid spots starring James Garner and Mariette Hartley, “Mikey Likes It” for Life Cereal, American Airlines (“Doing What We Do Best”), Chivas Regal, and many other clients.

Bernbach was fearless and took some hits for his role as a prominent Jewish-American working to popularize a German auto manufacturer so soon after World War II. He also was equally applauded and criticized for being part of the team helping to derail Barry Goldwater’s 1964 presidential bid with the airing of a single anti-nuclear war commercial (you can read about it here.)

Believe in what you sell; sell what you believe in

I am writing about Bernbach not just for his outstanding creative talent but also for his role as a visionary whose work had implications across many fields of endeavor. He was prolific in delivering oft-quoted remarks on topics related to communications, marketing, leadership, and the psychology of human behavior.

Many of his quotes resonate with me as I think about the approach that Flexible Plan Investments (FPI) takes in its work for financial advisers and their clients.

While the old school of advertising was pure “hard sell” (think Anacin’s pounding hammer for headaches), and many in the new school of the 1960s derided anything but pure “creativity,” Bernbach knew his agency’s role ultimately was to sell the client’s product in an insightful and human way that often brought a smile or touched emotions. He often talked about “mankind’s unchanging nature.”

He said, “I can put down a picture of a man crying and it’s just a picture of a man crying. Or I can put down a picture of a man crying in such a way as to make you want to cry.”

Related to this, “It is one thing to have a selling proposition and quite another to sell it. … It is not just what you say that stirs people. It’s the way you say it. … We must not just believe in what we sell. We must sell what we believe in.”

I would submit that FPI, under Jerry Wagner’s leadership, has been believing in what FPI “sells” and “selling” what it believes in consistently for over 38 years. FPI’s investment philosophy, or “selling proposition,” can be characterized as seeking to maximize upside market capture while actively minimizing downside risk—or as Jerry Wagner often refers to it, “dynamically risk managing client portfolios.”

Bernbach also said, “Properly practiced creativity MUST result in greater sales, more economically achieved. … Properly practiced creativity can make one ad do the work of ten.” (This was a promise he usually delivered on for clients.)

While FPI certainly cannot promise a tenfold increase in investment returns, there is a similar philosophical approach at the heart of its work. Over full market cycles, including both bull and bear markets, “properly practiced” risk management has an often-achieved goal of delivering superior, less volatile returns compared to passive investing. The “unchanging nature of human behavior,” which often can lead to unfortunate investment decisions, can be effectively counterbalanced by the non-emotional, rules-based investment strategies that FPI offers clients.

One final quote from Bernbach’s long list is one of my favorites, paraphrased here, “When we started our agency, we knew the kind of people we wanted to hire. There are two requirements: you had to be nice and you had to be talented. Nice without talent would not help us reach our goal. And life is too short for talented but not nice. We wanted both.”

In my experience proudly working for both DDB and FPI, I believe that principle holds true for both organizations—and I think the thousands of financial advisers and retail clients working with FPI, the company’s employees, and its investment industry partners, would agree.

Enjoy the Super Bowl—and let’s hope the game is as good, if not better, than the commercials.

(Note: It is difficult to write about a major sporting event without acknowledging the tragic death of Kobe Bryant, his daughter, and seven others on Sunday. Our thoughts and prayers are with their families, as well as those around the world facing the threat of the coronavirus outbreak.)

Market update by FPI Research

Equity markets have begun to sell off significantly today (1/27) after Friday’s (1/24) sell-off, which put equity markets in the red for last week. The S&P 500 fell 1.03%, the Dow Jones Industrial Average lost 1.23%, and the NASDAQ 100 fell only 0.35%, having enjoyed more upward movement earlier in the week.

The most recent market activity appears to be temporary and news-focused. Overall, the economic picture appears much rosier than it did in 2019. The yield curve inverted last year, but that event was coupled with fiscal stimulus, which is unprecedented. Typically, these two variables move together and have predicted each of the last seven recessions. However, when the yield curve inverted last year, fiscal stimulus heavily increased, which will likely reduce the probability of a recession. Additionally, recent weakness in manufacturing numbers has faded and productivity continues to increase.

A few intermediate-term concerns loom on the horizon, despite seemingly strong fundamentals. Sentiment is near all-time highs, which often means the market is overdue for a move downward. Sentiment movements tend to shift more frequently than significant economic variables, so any subsequent sell-off is likely to be short-lived.

While many news sources cite the outbreak of the new coronavirus in China as the reason markets have sold off the past two trading days, there is a more technical and fundamental reason: The market has been on an upward tear for a very long time. We were in the third-longest period without a sell-off of 1% or more in the S&P 500 since the Great Recession. In short, we were overdue for some profit-taking by investors. While it has been a while since we’ve seen such market volatility, it is par for the course in equities in general.

Historically, when the market opens down more than 1% on a Monday, it continues its downward trajectory. If it does so on days later in the week, the market enjoys some mean-reverting behavior. Tuesdays and Fridays, in particular, tend to experience upward movement during the day. Today, we’re seeing the typical behavior for a Monday when the market opens down more than 1%.

Fortunately, the markets tend to rebound the next day after these events.

With the equity markets selling off somewhat last week, our best-performing strategies were based in fixed income or alternative asset classes. Strategic High Yield Growth was up about 1.50% for the week. Our Gold Bullion Strategy Fund (QGLDX) rose with gold bullion, allowing our QFC TVA Gold strategy to finish the week up 0.94%. All-Weather Static was also positioned well for the week, gaining nearly 0.80%.

Some of our longer-term, aggressive, equity-based strategies were not fast enough to switch out of the market near the end of the week, causing them to struggle. These strategies have enjoyed significant returns over the last quarter, and it’s unlikely that they’ll move into positions of safety unless the market continues to experience this level of volatility. For example, QFC Market Leaders Aggressive was down nearly 3% last week, but it is up almost 12% for the last three months.

It may be tempting to make changes to an investment portfolio when this level of volatility arises. The benefit of using Flexible Plan Investments is that our strategies are quantitative, which helps take investor emotions out of the equation. Our strategies are designed with the long term in mind and aim to help investors navigate tumultuous periods such as these.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.  Inherent in any investment is the potential for loss as well as profit.  A list of all recommendations made within the immediately preceding twelve months is available upon written request.  Please read Flexible Plan Investments’ Brochure Form ADV Part 2A carefully before investing. View full disclosures.