Not David Letterman's Top Ten by any means but a top ten that needs to be looked at. Today another company was added to the top ten bankruptcy list. Company, Bankruptcy Date, Assets Lehman Brothers Holdings Inc., Sept. 15, 2008, $691.06 billion Washington Mutual Inc., Sept. 26, 2008, $327.91 billion WorldCom Inc., July 21, 2002, $103.91 billion General Motors Corp., June 1, 2009, $91.05 billion-x CIT Group Inc., Nov. 1, 2009, $71 billion Enron Corp., Dec. 2, 2001, $65.50 billion Conseco Inc., Dec. 17, 2002, $61.39 billion Chrysler LLC, April 30, 2009, $39.30 billion Thornburg Mortgage Inc., May 1, 2009, $36.52 billion Pacific Gas and Electric Co., April 6, 2001, $36.15 billion x-GM listed $91.05 billion in assets in its annual report as of Dec. 31, 2008, but listed $82.29 billion in assets as of March 31, 2009, in its bankruptcy petition. (Source: Businessweek) Notice that they came is spurts. Six of them in the last 13 months. The other four came in a 21 month span. Obviously the economic picture is pretty important for why they went bankrupt though each of them have some unique issues. The most recent ones all involved a breakdown in the credit bubble we have created in our country. Two banks, two auto manufacturers, a real estate investment company and an investment bank. Financing drove the automotive market, the real estate market and the investment bank. Once the bubble burst they came crashing down. Are we done with bankruptcies of this size? I don't know but I wouldn't count out at least one more being added to this list before our current economic slow down is completed. So what can we learn from these two very distinct set of time periods? April 2001 to Dec 2002 had 4 of the largest bankruptcies. Then it was a telecom, a insurance company wanting to be in real estate, and two energy companies. A very different list than what we have today. Worldcom was focused on growing through acquisitions in a very competitive industry. Enron basically lied about their finances for many years before things simply imploded on them. They used their higher stock prices to grow dramatically. Pacific Gas was caught in an energy crunch and limited by their inability to rise prices in California. Conseco started in insurance and got into trouble with mortgaging mobile homes. To be honest I am not sure there is a true link between them other than they happened at the same time. Today's set of bankruptcies are much more closely tied together. They are based on a faltering economy and a change in mindset with consumers. Most of them got into trouble by thinking that the past was predictive of the future. They took risks in leverage based on how things have been in the past. If they continued into the future, they would have been ok. But unfortunately for them, life happens and things change. When the economy slipped, they weren't able to adjust because they had leveraged themselves to the point of needed that growth to stay alive. This is the double edged sword of leverage in investments. When things go well, you report incredible success. If you can leverage 50 to 1, you only need a 1% gain in the foundation to report a 50% gain overall. The problem is, this works the other way too. If your investment drops 1% you lose 50% of your money. People who deal in the forex markets, the futures markets, stock options and real estate are very familiar with these types of results. When things go your way you can make a lot of money fast. When things go against you, it drops just as quickly. This is one of the reasons you should always be diversified in your investments. Leverage is an incredibly powerful tool. But like any tool, the risk associated with it must be understood. Leverage is also the single most important thing to understand when it comes to growing your wealth dramatically. 
PS If you own your own business or are thinking about it, you really need to check out The Worst Case Scenario for Small Business. For the cost of a book, you can get access to nearly $1,500 in video and audio training. I have been through the training and it is pretty awesome. I am waiting on the book to be delivered from Amazon and will give an update on it as soon as I get it read. PSS Seriously – you didn't click the link above? Just click here so you don't have to move your mouse at all
Related Posts - A Daily Plan for Building Wealth Do you have a daily plan for building wealth? A set of activities if repeated often enough would create the lifestyle and life that you...
- Number 1 Business Motivation Speech Sometimes we need a boost in our motivation. During bad economic times, our outlook on life may struggle. We see problems and pitfalls instead of...
- Free Business Software - Open Office Vs Microsoft Office For many small businesses Microsoft Office is a GOLD standard software package. It includes Excel for accounting, tracking inventory, developing spreadsheets, etc. I have...
- My Top 8 Posts of 2009 I spent the weekend trying to fix a computer (which I am normally very good at), working on a sink (which I am normally very...
- What are you waiting on to build your wealth? Mike Litman of Conversations with Millionaires recently stated at his presentation for Continuity Summit in Stamford CT that the first 15 yards are the most...
Related Websites - 12 Words Christians Can't Say and 13 Words We Must As we give up words that are contrary to the will of God we need...
- Powerball AU 40 million Tonight's Powerball Jackpot of AU $40 million is the biggest ever offered on Australian Powerball....
- TradeKing Now Reimbursing New Clients For $150 In Account Transfer Fees. If you have been thinking of switching your brokerage house, now might be a good...
- Athlete Profiles: Chris Evert Chris Evert is perhaps one of the most well known female tennis stars who shot...
- One Hundred Pushup Challenge -- Knee Push ups, 1 Handed Knee Pushups, and Full Push ups Well if you haven't heard by now then you aren't paying attention to the Health...
