Global Recession ? - Sometimes we hope to be wrong

On February 15th we discussed how the US deficit spending was not going be useful to curb the current crisis. See this previous post.The emerging markets so-called "decoupling-theory" has been tested, as predicted. India has been no exception, with the market correcting sharply.

Another idea we discussed in our CFA class in June'08, was if a global recession would happen. Going by the financial press and the TV analysts, it will not happen.
But then, following the herd seldom makes significant and sustainable alpha.

Whether it happens or not, it MUST be a scenario for which every VaR or EVT model worth its name, must account for. As a wise man once said: " The devil is in the fat tail. Stress test to save on stress later".