Good morning.

My column this weekend, "Why Investors Went Bananas Over AMC Stock," looked at what happened on Aug. 22 when AMC Entertainment Holdings Inc. issued preferred shares as a special dividend to investors in its common stock.

In theory, the new preferred shares, named APEs after the individual investors who have flocked to AMC in the past couple of years, should trade at the same price as the company's common stock.

That's what the efficient market hypothesis (EMH) would say.

In fact, I wrote, it's the simian market hypothesis (SMH) that rules here:

     AMC told investors the APEs were “designed to have the same economic value and voting rights” as the company’s common stock [and] “should have similar market values.”
     Yet, in early trading on Aug. 22, the shares of both AMC and APE shot up until their combined price nearly hit $23...
     Then, at the end of that first day, the total market price of AMC and APE shares sank below $16.50...
     If AMC ends up issuing hundreds of millions of new APEs, even that discounted price could turn out to be far too high.
     One likely reason the market hasn’t fully sorted out the price: Many of the apes remain fiercely loyal to AMC, even though the company’s management has largely bailed out.

The crazy behavior of the APEs reminds me of a market fluke from March 2000. The computer networking firm 3Com Corp. sold a sliver of its holdings in Palm Inc., the pioneering handheld device maker.

Investors were so ga-ga over Palm that its shares hit a total value of more than $53 billion on their first day. Meanwhile, 3Com’s market value fell to less than $28 billion -- even though the company still owned 94% of Palm.

Furthermore, 3Com shareholders were entitled to receive 1.525 shares of Palm for each 3Com share they held.

University of Chicago researchers Owen Lamont and Richard Thaler later showed that the stock market was valuing the rest of 3Com’s assets at minus $22 billion!

The main culprit? Short sellers, professional investors who bet against overvalued stocks, weren’t initially permitted to trade Palm -- and once they were, the scarcity of Palm stock made short sales extremely expensive.

That lack of short selling kept the share prices of 3Com and Palm out of whack.

Ironically, the apes despise short sellers. 

Perhaps it's poetic justice that history seems to be repeating itself here.

The term "ape" has become a proud nickname for the risk-loving individual investors who've embraced such so-called meme stocks as AMC and GameStop Corp. or crypto assets like NFTs (non-fungible tokens).

Some of the apes do intensive (although often highly unorthodox) research. Others pride themselves on their sheer ignorance.

What none of them might realize is that there's a centuries-old link between images of apes and money.

Pieces in Bored Ape Yacht Club, the collection of NFT cartoons that have often sold for hundreds of thousands of dollars apiece, are an echo of artwork from late medieval and Renaissance Europe.

Recent images of bored apes blowing bubbles -- the personification of a ridiculously overpriced market -- remind me of this:

A portrayal of two apes from 1562 by the artistic genius Pieter Bruegel the Elder is often called mysterious, although I don't find it so.

In a battered window arch high above a harbor, two monkeys (probably Zanzibar red colobus, or Piliocolobus kirkii) are fastened to a huge iron ring with glittering iron chains.

The ape on the left (the "sinister" side in medieval Christian tradition) stares out at us with the shock of recognition in his bulging eyes and an uncannily human smirk on his face.

Here, I think Bruegel is playing with the belief, popular in his time but now doubted by etymologists, that the Latin words simia (ape) and similis (similar) derived from the same root.

As the 12th-century author known as Pseudo-Hugh of St. Victor wrote:
     They are called simia in the Latin language because people notice a great similitude to human reason in them.

The left monkey's tail dangles over the front of the ledge, projecting off the two-dimensional canvas and into the space between him and us -- merging his painted world with our real one.

I'm looking at you, says this monkey. Look at me! We're not so different, are we?

The monkey on the right hunches away from us as if he were ashamed. He stares at the stone beneath him, ignoring the birds soaring overhead and the boats catching a breeze out on the open water.

With the wide world out in front of him, he is fixated only on what he can see a few inches beneath his chin. He displays his backside, perhaps invoking a proverb by St. Bonaventure, the 13th-century Franciscan philosopher:
     Exemplum de simia, quae, quanto plus ascendit, tanto plus apparent posteriora eius. (Consider the example of the monkey -- who, the higher he climbs, the more he shows his behind.)

With great care, Bruegel painted the crushed shells of almonds scattered on the stone ledge. They are behind the monkey on the right, but in front of us.

I have no doubt that Bruegel was illustrating at least one of two fables (or exempla, as preachers called them in their sermons).

One is from Aesop:

Sooner or later, says Aesop, no matter who you pretend to be, greed shows who you really are.

The other is from the theologian Jacques de Vitry, who died in 1240. Translated with lots of poetic license, it goes roughly like this:
     And it is said of the monkey that he grabs greedily for the nut but ends up throwing it away, because he superficially tastes that the skin inside the shell is bitter, so he never savors the rich heart of the nutmeat. By the same token, the fools in our time imagine that they will be loved for their outward show of wealth, but they refuse to do the hard work of righteousness that will bring unto them the sweetness of the Lord....

This comparison "between the ape who discards the nut on account of its bitter rind and the sinner who relapses because he finds penance too burdensome" was cited "innumerable times" in European sermons, scholar Lilian M.C. Randall wrote in 1957.

Fables like these are surely what Bruegel wants to illustrate, and his moral is obvious: Being too greedy can pay off in the short run, but in the long run it leaves you with nothing. Besides, it's a sin.

(Part II of this post will appear in our next issue.)

Many readers have asked me to gather what I've written about the positive qualities that the greatest investors share.

You can find them all here:

Curiosity

Skepticism

Independence

Humility

Discipline

Patience

Courage

Cultivating these virtues can't prevent the market from crashing. But it should help prevent you from crashing.

After all, as the late investing writer "Adam Smith" (George J.W. Goodman) wrote in his wonderful book The Money Game:

...the end object of investment ought to be serenity.

A recent piece in Nature, the science journal, was about turning the art of saying "no" into a science.

The researchers found that by quantifying how often they said "no," and by turning it into a contest to see who could say no the most, they preserved "our energy and creative capacity to do a better job" on the projects, people and tasks that mattered to them.

I like to say that at least 95% of investing success consists in knowing what not to do. Warren Buffett once told me that the single most important word in investing is "no."

What have you said "no" to as an investor? How did it work out? Alternatively, did you say "yes" to someone or something that you wish you'd said "no" to?

To share your thoughts, just reply to this email. Be sure to include your name and location. Responses may be lightly edited for clarity or space.

Keynes also invested brilliantly in art, which I've written about here and here.

Finally, Keynes wrote about investing better than almost anyone who has ever lived. If you've never read his insights on managing your portfolio, you should; if you already have, now isn't a bad time to read them again.

Be well and invest well,

Jason

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Man is the only animal that blushes. Or needs to.
—Mark Twain