When did you come to the realization that something seriously wrong was about to go down?
I think it began to hit me when Electronic Games magazine changed over to Computer Entertainment magazine. There was even an article in the first CE mag about a plethora of arcade games that never made it past the proto/test phase (Actually I learned about Gottlieb's Screw Loose from this issue). Most games they wrote about sounded really interesting. I think thats about when I realized things were beginning to change.
It became painfully obvious when both the Inty III and Odyssey 3 were announced, then both got scrapped around the same time. A few months later, both companies fold and get out of the market. Everyone then thought Atari and Coleco were the only contenders left. When Atari announced losses - thats when I knew we were screwed.
Arguably - The ADAM was pretty much the straw that broke the camels back.