In 2007 index selling to pension funds was very popular. Excess returns were linked to daily funding rates. Your pnl was from the fees embedded which were small. But desks decided to make extra money by lending far out to get extra 30-40bps over 3-5 years. Discounting via LIBOR This made day 1 PnL. Some banks assumed prudence and reserved half of this day 1 pnl which traders disliked but couldnt do much. Come 2008, people discovered LIBOR is different and funding spreads are different. The quants started building models to take this into account, but

All of us are taught the three fish story in our childhood. One who thought ahead, one who reacts timely and one who is dumb. We are advised to be first one. That is the problem with life, we all want surety , forecasts of future but life is too random for that. 1/n Timely reaction/course correction is underrated skill. If first can be considered scenario analysis , the second can be considered to be risk management. Risk mgt can never happen without falsifiable hypothesis. It implicitly means, you are always looking out for being wrong 2/n

Few thoughts on the recession
1) Being in markets full time can make most look at the economic cycles as a bunch of numbers
2) A not so uncommon view is that the recession of 2008 didnt correct all excesses, the monetary policy has done is kick the can (mea culpa) 1/n 3) Thus several in market who are of bearish tilt call for a sharp correction of assets( which may or may not happen this recession).
4) Recession on other hand hits the marginal a lot , which is more relevant as median real wages have stagnated/ fallen over past 3 decades (2/n)