Paper Moons
WHEN BELIEF BECOMES REALITY IN THE MARKETS
“It’s a Barnum and Bailey world,
Just as phony as it can be,
But it wouldn’t be make-believe
If you believed in me…”— “It’s Only a Paper Moon” (1933)
At the beginning of the 20th century, before advanced photography was widely available, couples would pose in front of staged backdrops. Among the most popular were scenes featuring a painted night sky and a cardboard crescent—called “paper moons.” The props were fake, but the illusion was charming. Couples weren’t deterred by the artifice; in fact, they embraced it.
In 1933, the song “It’s Only a Paper Moon” captured this metaphor: the world itself is often artificial, fabricated—fake. Yet if one believes in it, it becomes real.
THE MARKET’S OWN PAPER MOON
Fast-forward to today, and financial markets carry their own resemblance to paper moons.
By traditional fundamentals, equity markets look inflated. Top tech stocks trade at lofty multiples, and valuations keep climbing. Conventional wisdom might flash warnings: a bubble, stretched returns, looming corrections. Yet investors aren’t retreating—they’re doubling down.
Corporations are pouring billions into artificial intelligence, robotics, and cloud infrastructure. The belief is clear: the future will deliver growth. And as the old lyric suggests, “it wouldn’t be make-believe, if you believed in me.” Right now, the market believes.
BELIEF AS THE DRIVER
In reality, we often take for granted just how little market behavior and our financial system as a whole are driven by strict, hardline, fundamental data. This is not unique to equities either. Consider our own fiat currency. Since 1971, when the U.S. abandoned the gold standard, the dollar has had no tangible backing. Yet it continues to serve as the foundation of the global financial system. Its power does not come from what it is, but from what we believe it to be.
Or better yet, look at Pokémon cards. Yes, those little laminated pieces of cardboard with pixelated fantasy creatures on them are among the most fascinating examples of alternative assets. Over the past 20 years, these cards have produced a cumulative monthly return of 3,821%. A rare card can sell for tens of thousands of dollars.
Why? Not because of intrinsic utility, but because of the value investors and collectors perceive. In a world shaped by perception, belief is often more powerful than reality.
THE AI AND ROBOTICS QUESTION
Which brings us to today’s market darlings: artificial intelligence and robotics. Are they transformative revolutions—or another paper moon?
The answer depends on whether belief holds. If investors, companies, and consumers continue to trust that AI will drive profits and productivity, valuations can remain intact. If that faith wavers, so too might the prices. Until then, sentiment fuels the engine. And right now, that engine is humming.
STAYING GROUNDED
Markets are not always rational. They are not always rooted in fundamentals. They are made of people—and people are guided by belief
That’s why discipline matters. An effective investment strategy acknowledges momentum and enthusiasm, but anchors itself in long-term planning, diversification, and risk management.
If investors and institutions believe in a continuing bull market, it may well become reality. But as with paper moons, it’s wise to remember: belief makes it real—until it doesn’t.