Barry Ritholtz writes on TheStreet.com about the myths that were reported in the business news media earlier this week that explained why the stock market fell.
“My top 10 myths of the Great Correction of 2007:
1. Chinese regulators caused the meltdown.
“The timing of the Chinese news release makes this statement suspect: On Sunday, China’s main stock exchanges (in Shanghai and Shenzhen) issued new guidelines regulating member securities companies.
“An article on the subject ‘China tightens regulation of securities dealers with new rules’ was posted at www.GOV.cn on Monday. Here is an excerpt:
China’s Shanghai and Shenzhen stock exchanges issued on Sunday the new rules of regulating their member securities companies in a bid to ward off risks in stock trading. The rules, which will come into effect on May 1, set limits to the varieties, methods and scales of stock trading that dealers are allowed to conduct, preventing them from engaging in high-risk business beyond their capacity.
“Note that these details were released on Sunday, and on Monday Chinese markets set new all-time record highs! Indeed, despite recent official discussions of new capital gains taxes, increased regulation and the government’s desire to reduce speculation in China, their indices had advanced 13% in the prior six sessions — all setting records.”
Read more here.
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