According to the WSJ’s “Heard on the Street“ column, in ‘98, amid a Russian debt default and the collapse of the hedge fund Long-Term Capital Mgmt, there were fears in the mkt that Lehman Brothers (LEH) would go bust. Investors sold their shares, pushing Lehman's valuation to historic lows. These days, after more than a decade of diversifying its business mix and moving to longer-term financing sources, almost no one believes Lehman is anywhere close to a blowup. Yet Lehman's shares are down 30% this year, just behind Bear Sterns (BSC) as the worst-performing investment bank. The reason for the selloff is Lehman's earnings outlook. Despite expanding its nonbond businesses, Lehman is more dependent on the bond mkt than most of its investment-banking rivals. With the mortgage mkt in turmoil and the buyout boom stalled, there is no doubt Lehman's profit is going to fall. The question is, how far and for how long. At Lehman's relatively low valuation of 1.4x BV, some investors and analysts think the mkt has become too pessimistic. "There were real fears that Lehman had a funding issue in ‘98," says Michael Peterson, of Pzena Investment Mgmt. "I don't believe that's the case this time. Lehman is very cheap right now."