Sprint hasn’t made a profit since 2006 and will probably run out of money before mid-2018. If Sprint defaults, Softbank will likely lose all of its $21 billion. And what about Fast Retailing? Will building new retail locations all around the world – as Fast Retailing intends to do – prove to be a wise use of capital? Will Japan’s enormous equity purchases, which have supported both Softbank and Fast Retailing, generate real economic growth, by stimulating the economy? Or will this huge inflation only promote reckless speculation and bad investments? What will happen around the world as more countries to try to emulate Japan? Can you successfully back a currency with the shares of highly volatile companies? In 2014, Switzerland’s central bank began buying equities, too. But since its domestic economy is so small, it decided to invest globally... Today, the Swiss central bank owns more than $60 billion worth of U.S. stocks, including a huge $1.7
not likely to be efficient at all. It seems utterly ridiculous, in fact. Why would a company with a high share price be particularly adept at putting more capital to work? What if they’re merely good promoters and have figured out a way to game the system? In 2013, riding the wave of the Bank of Japan’s investing spree, Softbank bought $21 billion worth of America’s fourth-best wireless telecom, Sprint (S). Immediately after the purchase the shares began to decline and eventually fell in half. Sprint, meanwhile, has seen its network investment costs
explode higher (reaching over $9 billion last year) and has had to borrow over $30 billion to remain competitive. Meanwhile, a price war has broken out with the leading vendor of wireless service, Verizon (VZ), knocking of Sprint’s flat-rate pricing offer. During the 2015-2016 correction in corporate bonds, Sprint’s most recently issued debt fell to $0.75 on the dollar, indicating that most investors don’t believe the company is likely to repay these obligations in full. Dennis Saputo, a senior credit analyst at Moody’s Investors Service, told the Wall Street Journal that
By permission Michael Ramirez and Creators Syndicate, Inc.
20 | June 2017
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