From Gerd Kommer and Maximilian Bartosch
This post was updated in February 2026.
2021 was a fantastic year for stocks. The MSCI World produced an annual return of 33%, the DAX one of 16% (both figures in euros). This means we have been experiencing above-average stock market profits for almost 14 years. German real estate also returned well above its historical average in 2021 and in the years since 2010. Only gold returns were anemic in 2021 and over the previous ten years.
When important investment markets continue to rise across such a broad front for so long, some investors forget what it feels like when the markets drift “south” violently and for a long time. The unpleasant emotional situation that then arises is of course primarily a result of the red numbers in your own portfolio statement. But it is reinforced by a certain type of negative headlines in the traditional media and on the Internet. We will address this particular type of headline in this blog post.
False headlines in the financial media
This refers to formulations and headings such as the following:
- “Sell-off on Wall Street is gaining momentum”
- “The selling panic on the world stock exchanges is spreading”
- “Escape from Gold”
- “Economic concerns trigger sell-off in Frankfurt office properties”
- “Investors are fleeing the ruble”
- “Investors are throwing SAP shares out of their portfolios”
- “Shares soon without buyers?”
- “Sale on Bitcoin and Ethereum”
- “After five months of raw materials party, everyone rushes towards the emergency exit”
- “Investors are withdrawing from emerging markets”
- “The development in the European real estate market is causing many investors to withdraw their money from there. The US market benefits from this.”
- “Dax closes more than 350 points in the red – investors switch to gold and bonds”
- “Stampede out of stocks and into bonds”
- “Investors seek refuge in defensive stocks”
- “Flight into quality bonds”
If we encounter such formulations and statements in the media or on the Internet during an incipient or long-lasting market crisis and our own investments are at least a little affected by them, then such statements can trigger a real tsunami of fear in us. Maybe we will even sell or reduce our investment because of this.
The problem with the article titles and statements listed above is that they are without exception and completely wrong. Each and every one of these statements represents a logical impossibility.
Before we explain why they are completely wrong, we ask you to skim the headlines again and consider what the common error in all the statements might be.
Why the “escape from investment X” statements are wrong
The answer to our quiz question can be clearly illustrated with an example. We take the third headline on gold as an example. For every seller who “escapes” from gold, there must be a buyer who “escapes” from gold. Every sale is also a purchase and a sell-out in the sense of selling most or all of securities is technically impossible. Because that is the case, the headline is false and misleading. A general “flight from gold” is impossible. Every security, every asset must be held by someone at all times. In scientific financial economics this is called “equilibrium accounting”.
What is Equilibrium Accounting?
Equilibrium Accounting is a simple yet powerful concept in financial economic logic, with the help of which you can expose many investment pornographic statements in the financial media as the sensationalistic, false and, if followed, harmful nonsense that they far too often are.
Equilibrium Accounting implies two simple but fundamental statements:
(1) Purchases and sales in the capital markets and real estate markets are exactly balanced in every relevant period
(2) every security, every investment in the capital market, including the real estate market, must have an owner at all times.
The two actually simple and yet often overlooked facts have extremely practical implications:
Even if the stock market tumbles downwards in a mega-crash, there are just as many buyers as sellers. A “withdrawal of investors” (i.e. the market) from a security or an asset class, a “flight” or “switching from low quality to high quality” or a “sell-off” – none of these can occur either at the level of the market (at the level of an asset class) or at the level of an individual security.
A media headline like “Stampede out of stocks and into bonds” is therefore simply nonsense when it comes to both stocks and bonds. For every investor rushing out of stocks, there is an investor rushing into stocks, and it's the same with bonds.
Another example from the Handelsblatt from January 24th, 2022. It says "Risk off - that is, get out of the risk - was the motto of investors last week. They increasingly sold stocks and cryptocurrencies that fluctuate in value." Sorry, dear Handelsblatt journalist, you are writing nonsense – most likely to generate click rates. Investors did not increasingly sell stocks or cryptocurrencies last week.
Again, every security must have an owner at all times. An individual investor can “flee”, i.e. sell, but not “the investors” or “the market”, although that is exactly what is expressed in the relevant reports.
The oft-heard formulation that the Swiss franc is a “flight currency” is also nonsense. If the exchange rate of the CHF e.g. B. suddenly increases significantly in a geopolitical crisis of whatever kind (as has often been the case historically), [1] then that does not mean that the CHF now has more buyers or owners than the currencies whose prices have fallen. That's impossible. The CHF money supply and that of the falling currencies were the same immediately before and after the sudden increase. Here too, despite the price increase, there is a CHF seller for every CHF buyer. The same is true with the alleged “flight asset gold”. During the crisis, the relative “popularity” of CHF or gold among investors increases. More investors now want to hold these assets. But that doesn't work. In order to keep demand and supply in balance, the price (valuation) of CHF or gold must increase.
When there are strong negative price movements, journalists and bloggers spread the image of a burning cinema: someone shouted “fire” and now everyone wants to get out in a panic. However, when it comes to securities markets, this picture is skewed and misleading even during strong downward movements. Misleading because just as many market participants want to get into the burning cinema as they want to get out.
As far as the influence of “selling pressure,” “sell-off,” sell-off, or, conversely, “excess demand” on the price of a security or asset class: No individual security or asset class experiences a “price crash” or “price explosion” because of too much supply or too much demand - simply because too much supply or demand cannot exist in a free market. In such a market, supply and demand are always exactly the same. The price mechanism ensures this.
Why Equilibrium Accounting is useful
Equilibrium accounting, as a logical concept, is likely to be particularly helpful in investor practice when prices fall sharply, but it also applies to sharp price increases. Then the media says, for example, “rush on Apple shares”. Such incorrect formulations trigger FOMO buying (Fear of Missing Out) in some private investors, a predominantly greed-driven investment that is statistically damaging in over 50% of cases.
By the way, for price changes, even large price changes, in a single security or an asset class, you only need a single purchase or sale and both are the same anyway. There is no necessary connection between an unusually high number of purchases/sales and strong price movements. In the case of very illiquid securities, there are often only individual purchases/sales behind a strong price movement.
The “price explosions” or price crashes that actually occur in a market do not happen because everyone suddenly buys or everyone sells (that is logically impossible), but quite banally because the market, i.e. the stock investors as a collective, significantly changes its assessment of the future prospects of the security or an asset class. Of course, that would be a rather unspectacular article title and that's why we won't read it anywhere. You can't expect so much honest realism and so much factuality from a normal financial medium or financial blog.
In 1985, the DAX had a fantastic annual return of 84%. Did this happen because everyone was euphorically buying? Nonsense. Even in this “year of stock euphoria” (media headline), there were just as many sellers as buyers, i.e. investors who behaved “uneuphorically” and sold.
Now someone could object to the statements we have made here that the number of buyers and sellers does not always have to be exactly identical if there are a few “large” sellers and many “small” buyers or vice versa. That may be true, but - firstly - it does not occur permanently on stock exchanges and - secondly - it does not change the fundamental correctness of the statement at issue here: Every buyer of a security must always be faced with a seller of this security.
How do new share issues and share buybacks fit into Equilibrium Accounting?
The existence of share issues and share buybacks does not put the principle contained in Equilibrium Accounting into perspective. On the one hand, these processes are only a microscopic fraction of the annual trading activity on the global stock market. On the other hand, issues and buybacks are ultimately also buy-sell transactions, so even with securities issues and share buybacks, every buyer is opposed to a seller.
It is immediately obvious that it makes a significant difference for a private investor whether he mistakenly believes that a drastic downward price movement is primarily caused by the fact that “everyone” or at least “a very large number” are now selling the security or asset class, or whether he correctly believes that there are still just as many buyers buying into the security or asset class and that the market is simply adjusting its collective assessment of the price to new information.
Next time you hear about “panic selling on the Istanbul Stock Exchange,” now know that the exact same number of “panic buying” was happening at the same moment. But because prices have fallen, journalists and bloggers are calling it “panic selling” instead of “buying euphoria”.
Economic logic and financial journalism are often not best friends.
Conclusion
Anyone who regularly travels through the sensationalist jungle of the financial media and the Internet will inevitably be confronted with hyperventilating news and statements about major changes in the price of an asset or an asset class - be it the SAP share, the Chinese stock market, French government bonds, Spanish real estate, the US dollar, Bitcoin or Scottish whiskey. At such a moment, think about Equilibrium Accounting. Realize that the asset or asset class in question must always be bought by someone and sold by someone at the same time, regardless of whether the price has just gone up or down. If you consider this inconspicuous fact, suppressed by journalists out of ignorance or sensationalism and by representatives of the financial industry for marketing reasons, you will realize how many public headlines are illogical, exaggerated or false. This will help you avoid harmful buying or selling decisions. Knowledge of Equilibrium Accounting contributes to more serenity and peace of mind.
Endnotes
[1] After the crisis has subsided, the CHF will often fall again.