Five years ago this week, an investment firm paid $3.4 million for a drawing of an ape. It was a record. Brandon Buchanan's firm still owns it. The best offer for it today is about 97% lower, Spencer Jakab writes in Tuesday's Heard on the Street. That drop is typical for the Bored Ape Yacht Club. You can look at his ape, and the 9,999 others, for free. Copying one for your own use is allowed too. Owning it on the blockchain is the part that costs money.
Jakab's first lesson is social proof. Celebrities have always endorsed products. Buying one with your own money is a stronger signal. Justin Bieber, Snoop Dogg, Paris Hilton and Jimmy Fallon all bought apes, and the news stories named the dollar amounts. Once a price gets broadcast, it starts to sound reasonable. That's anchoring. It can warp what we expect a speculative stock to be worth. It's worse with art, which never produces a dollar of cash flow.
The second lesson is identity. Some buyers treat meme stocks or crypto as a way into a group. The apes were sold as a club. Fallon told Hilton on The Tonight Show that they were part of the same community. Both were later sued for not disclosing financial ties to the apes they promoted. Jakab says the case is weak, since the apes probably aren't securities.
Buzz and scarcity
Prices for collectibles have only a loose link to beauty. In 1958, Salvator Mundi went for $125. Buyers then believed a student had painted it, not Leonardo da Vinci. In 2017 the same painting brought $450 million. Fewer than 20 paintings by da Vinci survive. That's the formula. Buzz plus scarcity. Buchanan says he'd sell the fund's ape if the price rose tenfold, but probably not one he owned himself. He'd hate for NFTs to be remembered as monkey photos that went bust. Jakab's closing joke is that a price built on psychological anchors tends to make a monkey out of the buyer.
Our read
This is Behavioral, and the trap has nothing to do with apes. An anchor is any number that got into your head before you did the math. A celebrity's purchase price. A neighbor's sale. The high your stock hit two years ago. None of those is a value. A value needs cash flow, or a buyer who needs the thing, and an ape has neither. We'd put NFTs and meme coins in one bucket. It's speculation, not investing, and we'd never dress it up as the second. Collectibles are different. Buy the painting or the watch because you love it. Keep it out of the retirement plan, and don't count it as savings.
In your own plan, anything you own for love sits outside the retirement number. The one check this week is your anchors. Pick the one holding you keep because of a price it used to have. Ask what it's worth on today's facts, not the number in your head. Bring it to your next review and we'll run it with you. The umbrella is easier to find before the rain.