Walt BrennanFAULT LINE LEDGER
Read the drawer, not the lobby

Ten of these 30 companies showed a warning sign more than two years before going under.

A free 16 page checklist: 12 warning signs, each tied to the real company, the date it showed and the source, from 30 famous bankruptcies. Run it on any company in ten minutes.

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Cover of Spot the Collapse Early, with Walt Brennan's portrait in a gold medallion
1Profit the cash doesn't show2Gains booked today on deals that pay later3Debts parked off the balance sheet4Cash nobody outside can count5Buyout debt bigger than the business6Money that can leave faster than it can be paid7Returns too smooth or too high8Losing more as it grows9Selling the furniture to pay the rent10Cutting what the customer came for11Auditors and suppliers want it in writing12One person nobody can tell no
Why this exists

"How many other Enrons are there now?"

That question shows up under almost every collapse video. So does this one: The mark-to-market explanation was the clearest part for me. People don't only want the drama. They want to know how it worked, so they can see it coming next time.

Here's what I've found reading the filings. Companies rarely die from one scandal. The numbers turn first, usually cash or debt, and they sit in public documents for months or years while everyone watches the story.

Ten of the 30 companies in this checklist showed a sign more than two years before they went under. Toys "R" Us carried its buyout debt for twelve years. It was in every annual report.

Here are the 12 things to check, where each one hides, and the real cases where each showed, so you can read a company yourself.

Walt Brennan, Fault Line Ledger
Sign 1, free right here

Put two lines side by side

Most people read one number: profit. Sign 1 asks you to read it next to cash from operations, the money that came in from running the business. Both are in every 10-K. Here's the habit with example numbers.

Before: the headline

Net income, year 1$40M
Net income, year 2$70M
Net income, year 3$110M

A company on a run. This is what the press release leads with.

After: the drawer

Net income, year 3$110M
Cash from operations, year 3$5M
Profit with no cash behind it$105M

Where did $105 million go? Look at receivables and inventory. If they ballooned, the sales may be on paper only.

Sunbeam's 1997 is the classic case. The SEC later said at least $60 million of that year's earnings came from improper accounting, including "bill and hold" sales of goods that never left its warehouses. Sunbeam filed for bankruptcy in February 2001. The checklist gives you 11 more checks like this, each with where to look.

The line nobody read
"Our historical operating results indicate substantial doubt exists related to the Company's ability to continue as a going concern."
Sears Holdings, annual report filed March 21, 2017. It filed for bankruptcy 19 months later.
What's inside

12 signs, 30 bankruptcies, one scorecard

12warning signs, each with what it looks like, where to find it in a 10-K, and one yes-or-no check
30real collapses from 2001 to 2024, each with the date you could have read the sign and the source it came from
1printable scorecard to run all 12 on a company you own, work for or buy from

I. The cash drawer

  1. Profit the cash doesn't show
  2. Gains booked today on deals that pay later
  3. Debts parked off the balance sheet
  4. Cash nobody outside can count

II. The debt drawer

  1. Buyout debt bigger than the business
  2. Money that can leave faster than it can be paid
  3. Returns too smooth or too high
  4. Losing more as it grows

III. The people drawer

  1. Selling the furniture to pay the rent
  2. Cutting what the customer came for
  3. Auditors and suppliers want it in writing
  4. One person nobody can tell no

Plus a chart of how long each warning ran before the end, from twelve years for Toys "R" Us to nine days for FTX.

Look inside

Real pages from the checklist

Start here page with the three drawers
Start here: the three drawers and your first ten minutes
Signs 1 and 2 with cases
Signs 1 and 2, with Sunbeam, WorldCom, Enron and Global Crossing
Part II opener with a Piranesi engraving
Part II opens the debt drawer
Signs 7 and 8
Signs 7 and 8: Madoff, Terraform, WeWork, MoviePass
Chart of how long each warning ran
How long the warning ran, all 30 cases
Blank scorecard
The scorecard you fill in
Walt Brennan
Who made this

Walt Brennan, Fault Line Ledger

I'm Walt. On Fault Line Ledger I read the filings out loud and explain where a company really went wrong, cause by cause and number by number. Most collapse stories sell the drama and skip the numbers. Under the loud story there's nearly always a boring accounting reason, and it's in the filings before it's in the news.

  • Every case names its source: annual reports, SEC filings, examiners' reports, regulators' statements and the press reports that first raised the problem.
  • Nobody is called a fraud here without a court record or a filing behind it.
  • Dates and dollar amounts, never old stock charts that mislead after reverse splits.
Questions

Before you sign up

Does it tell me which company is the next Enron?
No, and be wary of anyone who says they know. It gives you the 12 checks to run yourself, on the companies you care about. This is a way of reading, not advice to buy or sell anything.
Do I need to know accounting?
No. Each sign says in plain words what to compare and where it sits in the annual report. Annual reports for US public companies are free on SEC EDGAR at sec.gov.
Will I get anything else?
Emails from Fault Line Ledger with new cases and the line nobody read. One click unsubscribes.
Can I read it on my phone?
Yes. It's a 16 page PDF that opens on any phone, tablet or computer, and the scorecard prints on one page.
Free checklist

Read the next one before the headline

12 signs, 30 real cases, one scorecard. $0.

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