The legacy of letting Lehman die is pretty mixed. As the WSJ reports, Lehman's demise really kicked off the cash crunch. (By the way, has anyone else noticed that they redesigned the site and are ungating more of their content? If this is Murdoch's doing, I'm all for him.) The fact that money market funds owned Lehman bonds contributed to their drop in Net Asset Value below par--kicking in redemptions and a Federal bailout. Still, while it doesn't look like people took events that seriously after Bear Sterns--including Lehman, which was tardy in finding a buyer--Lehman's fall was enough to ensure a round of bank consolidations and recapitalization.
And, of course, we are not at a bottom, though I did pick up quite a bit of stuff right around the short-term bottom that we saw. It'd like to imagine that absent Congress not approving the bailout, we would have seen the worst, but I'm no counterfactual historian. In any case, trying to time or predict macro events in the economy is as hard as predicting the weather. No one worries about selling at the exact highest price, so why worry about that when buying?
All that said, I remain optimistic--cautiously exuberant, if you will--about the future. The "fundamentals" of economic strength are doing well; growth in BRIC and frontier markets is going on a breakneck pace, developed countries remain filled with capital and educated workers, and global flows in capital and ideas remain fluid. Meanwhile, equities have seen something like an eight year price slump combined with a third-off haircut. It's always the end of the world when you're facing the full brunt of the crisis, and it's those people who are able to stomach buying into panic that make out like bandits.