, Columnist
Watch for This Toxic Trifecta Before the Next Financial Meltdown
“When you see one cockroach, there are probably more.”
Photographer: Eva Marie Uzcategui/Bloomberg
Bankruptcies are a routine event for companies relying on large amounts of high-yield debt for their capital. Investors reserve much of the high income they receive in good times for the inevitable losses in bad times. What is not routine is companies collapsing suddenly amid allegations of massive fraud, and in ways that destroy business operations, inflicting losses on employees, customers and suppliers as well as investors.
Like the first swallows of Spring, these collapses can be the first sign of a major financial meltdown, often brought on by a combination of excessive leverage, draining liquidity and misguided valuations.