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2 NAFTA 2 Furious!

Daniel Chase

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Remember, remember the 8th of December 1993. This was the fateful day that President Bill Clinton signed the North American Free Trade Agreement (NAFTA) Bill into a law. For all you psych majors who searched Amazon (AMZN) during Intro to US History, allow me to briefly enlighten you…

NAFTA was a trilateral agreement between the United States, Canada, and Mexica, which, upon enactment, would allow all importing and exporting of goods between the three nations to be free. Typically, when a company imports or exports a product to another country, they pay a tax, or “tariff” on that product. Enter NAFTA stage right, no tariff.

The logic behind the passing of NAFTA, at the time, seemed clear. Free trade makes it cheaper and easier for companies in one country to sell their product in another country which, in turn, benefits all countries involved. NAFTA, like a 3-year-old chess prodigy, was destined for greatness, but alas, the agreement was far from perfect.

With the financial burden of tariffs removed from the manufacturing and import/export process, companies were able to catch their breath. Prominent economists at the time predicted that NAFTA would create bountiful trade surpluses with Mexico and thousands of job opportunities would be created, however this was not the case. On the contrary, NAFTA led to U.S. trade deficits, not trade surpluses. This deficit continued through the decade following NAFTA’s enactment, taking a snack break in 2007, when the U.S. economy collapsed into the recession and demand for imports dropped off.

In addition to trade deficits, manufacturers recognize that cheap labor could be found in Mexico, rather than the U.S., and nearly 750,000 U.S. jobs are lost, mostly from the automotive, textile, and tech industries. Subsequently, the massive job migration suppressed wages. Companies used the Mexican labor shift as a threat to deter their employees from unionizing.

So you get the picture, NAFTA was severely flawed. Like my bedroom in my pubescent years, the agreement left the U.S. with “schmutz” everywhere.

1.21 gigawatts and 88mph later, we find ourselves 25 years in the future.

The New Deal

On October 3, 2018, a new trade deal was struck to replace NAFTA. The new name, with sex appeal like a Ferrari, is the United States-Mexico-Canada Agreement, or simply, the USMCA. The agreement originates from a campaign promise President Donald Trump made back in 2016.

NAFTA 2: Return of the Trade, 2 NAFTA 2 Furious, NAFTA To The Future, NAFTional Treasure, the agreement is back, but with a complete makeover. Major policy changes include new legislation on cars, labor, environmental standards, intellectual property rights, and digital trade provisions.

The key changes (C Major —> D Major) in the agreement are:

  • He Needs Some Milk!: President Trump wants his bones to grow big and strong, so strong that he demanded US farmers have access to Canadian dairy markets.
  • “Do you need to go to the bathroom? Nope, IP”: The USMCA deal extends previous terms of copyright law to 70 years beyond the life of its author (up from 50.) It also extends the amount of a time that a pharmaceutical drug can be protected from generic competition
  • Dude, Where’s My Car Made?: All automobiles must now have 75% of their components manufactured in Canada, the US, or Mexico in order to qualify for zero tariffs.
  • Sunrise…Sunset: Embedded in the agreement is a 16-year “sunset” clause — the terms of the agreement expire (sunset) after the aforementioned period of time. Additionally, the agreement must be reviewed every six years, at which point in time, all three nations must meet and decide the fate of the agreement.

This Little Trade Deal Went to Market

President Donald Trump was able to rewrite a deal that he tweeted in August 2017 as “the worst trade deal ever made,” and replace NAFTA with the USMCA. He’s publicly proclaimed the revised version of NAFTA as “the most advanced trade deal in the world,” going on to explain

Trump Tweet

that the deal comes with a brand new 6.5’’ Super Retina custom OLED display and is truly the most advanced deal on the market.

Following the announcement of the agreement on October 1, 2018, US stocks climbed towards records, with the Canadian dollar and Mexican Peso reacting positively as well. The S&P 500 Index jumped 0.6% by 12:29 that day.

According to Raoul Leering, head of international trade analysis at ING Group NV, “Everybody is happy and why is that? Because the possibility of tariffs on a variety of Canadian goods would have a much more negative effect on world trade.”

Looking Forward

All participating nations and their respective leaders are holding hands as this agreement comes into play. Trump on Monday showers Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau with praise for their assistance in coming together in a “great partnership.” These kind words from President Trump signal a turned cheek because, on several occasions this year, Trump publicly insulted Trudeau for being “meek.”

Only time will tell as to how successful the USMCA ends up being, but if it means Canadian milk in my morning, and typically late-night, cheerios, then I’m all for it.

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Editorials

President Trump Vs. The Democrats

Daniel Chase

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While I consider myself to be a learned individual, there are several things that still leave me puzzled, no matter how hard I try to strengthen my understanding. It makes no coherent sense to me why someone would pour the milk into the bowl before adding cereal, this is absurd. In the popular Earth, Wind, and Fire song, “September,” the lyric is “Badiya, say that you remember.” I attended a lecture given by the lyricist responsible for this song and “badiya” was justified by saying it sounds catchy. Leading scientists have proven that we burn off more calories in the process of eating celery than we actually absorb from the vegetable’s nutrients, yet we still eat it anyway. All above concepts remain a mystery to me, but the be-all, end-all puzzler in my mind is President Donald Trump’s devout obsession with building an elephantine wall along the US-Mexico border. 

Trump has fought tooth and nail since his inauguration to allocate government funds to construct his wall. It’s almost as if sixty years ago, when Trump was twelve years old, he sat at the bedside of his dying great-grandfather who said, “Donny…(cough, cough) Promise me you’ll do one thing in your life.” Trump, in tears, responded, “Yes, grandpa, whatever you want!” Great-grandpa Trump continued, “Promise me you’ll build a wall between here and Mexico. A wall so high that everyone in heaven will sigh in annoyance at its grandeur…Promise me…Promise…(he falls asleep one last time). There can be no other explanation for President Trump’s adamance in wanting this wall built. 

With the Democratic Party set to take back the house following the convening of the 116th Congress on January 3, President Trump publicly expressed his concerns about the fate of his wall with Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi on Tuesday. According to sources present at the meeting, Trump spoke, on end, about the importance of securing funding for border wall construction, going so far as to threaten to shut down the government if his demands aren’t met. 

“If we don’t have border security, we’ll shut down the government — this country needs border security. I will take the mantle, I will be the one to shut it down. I’m not going to blame you [Democratcs] for it.”

President Donald Trump 

In terms of taking the temperature of the room during the altercation, Mr. Schumer told the press that President Trump had thrown a “temper tantrum” over the wall, continuing to say “the president made it clear that he wants a shutdown.” From the most bipartisan perspective one can possibly muster, there is no way to see Trump’s behavior during the meeting with the two Democratic members of Congress as anything less than incredibly disrespectful. The president shared his opinions for several minutes, then he paused, turned to Ms. Pelosi and said, with an incredibly pedantic tone, “Nancy, would you to share a few words?” Pelosi took an audible deep breath, and spoke:

“I think the American people recognize that we must keep the government. That a shutdown is not worth anything, and we shouldn’t have a Trump shut down.”

House Minority Leader Nancy Pelosi (D-CA)

Pelosi’s attempt at a viral soundbite with “Trump Shut Down” aside, her words ring true for both sides of the aisle. Despite opposing perspectives on allocating funding for border security measures, no one wants to shut down the government. Nevertheless, the president persisted onward with his wall-based tirade. Trump tweeted more of his sentiments following the conversation with Mr. Schumer and Ms. Pelosi, threatening that “if the Democrats do not give us the votes to secure our Country, the Military will build the remaining sections of the Wall.” 

Now, I am not fully aware of every single power at the disposal of an American president, but I’m pretty sure the president cannot command the US military to stop whatever it’s doing to work on a project not approved by the other two branches of government. 

It’s clear that President Trump is getting nervous about making good on his promise to build a wall before the Democrats take back the House in several weeks. 

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Editorials

Is Snapchat Dying?

Daniel Chase

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For a very long time, I was convinced that I understood the inner machinations of social media. I truly believed that given how colorful my iPhone’s home screen was due to the cornucopia of collective apps placed strategically in folders based on what purpose the app served in my life.

Currently seated in my “social stuff” folder are apps like Facebook (FB) and Instagram (FB), staples in a content creator’s arsenal, along with YouTube (GOOG) and Skype (MSFT), for work purposes, of course. I waited to mention that I also use Snapchat (SNAP), the media sharing app created by parent company Snap Inc. (SNAP), because, to be completely honest, my use of the app makes me feel dated. I would wager several CVS coupons and a buffalo nickel that I belong to a dying breed of Snapchat (SNAP) users, a group of vagrants who no longer have even a single finger on the pulse of what’s trending and #relevant. 

Many moons ago, Evan Spiegel Snap’s CEO (SNAP) decided that the Snapchat app, albeit an immense success at the time, was due for a facelift. He insisted that the company redesign the user interface of the app by creating a new “Discover” section for creators to share ideas, videos, and other interesting content. Suffice to say Snapchat’s (SNAP) redesign was taken very poorly. In August, the company announced its second-quarter daily average users had dropped 2% to 188 million. It probably didn’t help that Kylie Jenner, a celebrity famous for something I’ve lost track of, tweeted asking “does anyone else not open Snapchat anymore? Or is it just me…ugh, this is so sad.” Ms. Jenner’s candor aside, the tweet knocked off more than $1 billion of Snap Inc’s market value at the time. 

“We’re watching a company explode into bits. This is the kiss of death to a brand like Snapchat with their base that has stuck with them.”

Eric Schiffer, Chief Executive Officer, Patriarch Organization 

According to Bloomberg, four of the last six quarters since Snap’s initial public offering in March 2017 have fallen short in terms of projected revenue for the company, and everyone seems to be waving their fingers and unimpressive bank statements at Evan Spiegel. The question is really whether Spiegel has any sense of where Snap Inc (SNAP) is going, and if so, what in the name of H.G. Wells is he thinking? 

In late 2016, Snap Inc. (SNAP) decided it was a camera company and developed “Spectacles,” a pair of sunglasses with a camera embedded in the lens for the purpose of snapping pictures and video. Sounds like a cool product, right? Well, it would’ve been if not for the fact that the glasses could only be used on the Snapchat app. Last year, the company ate $40 million in unsold inventory after the company ordered roughly 800,000 units from China. 

To put it very simply, I fear for the life of Snap Inc. (SNAP) and so do investors. Shareholders that were once proud to own stock in Snap (SNAP) are now fleeing in droves, largely in part to the fact that Snap’s shares are trading roughly 60% below its March 2017 IPO price, currently at $6.51 per share, according to recent reports. Spiegel doesn’t seem to know when to quit, as a recent report from Cheddar indicates that Snap Inc. plans on releasing yet another version of its Spectacles glasses, this time with two cameras and a higher price point of $350 per pair. 

My lack of understanding of Evan Spiegel seemingly has no end. If you release a product that consumers demonstrate little to no interest in, why would you spend more money on building out the capabilities of the product? It’s not that people don’t think Spectacles aren’t cool, in fact, they’re really sick. The issue is paying nearly $400 for cheap sunglasses that record 20 seconds of video only to be shared on a social platform that no one uses anymore. 

During a meeting with Snapchat employees back in July,  someone asked what was meant by Snap’s mission statement, “to contribute to human progress by allowing people to express themselves.” Spiegel responded calmly and said that he believes that “one  of the things that have been really helpful in maybe the past six months or so is that the contrast is starting to become more clear between our company and the other companies in technology.” 

Yes, Mr. Spiegel, I fear this is true and, if you don’t make some favorable changes, this may not bode well for your company. 

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Editorials

The Boring Company Is Anything But 

Daniel Chase

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Let’s talk about hyperloops. They represent a very real future for the transportation of humans and goods, and yet, I’d wager a large sum of money that few of us understand what a Hyperloop actually is/does. Hyperloop is a new form of ground transport that uses a network of subterranean tunnels inside of which large pods carrying passengers and cargo travel to their goal destinations. Hyperloop’s key difference between traditional ground transport is the pods hover in a vacuum-sealed tube utilizing a frictionless system similar to how an air hockey table functions. Elon Musk, founder and CEO of Tesla (TSLA), SpaceX, and for the purpose of today’s content, The Boring Company, first presented plans for a hyperloop back in 2013 with the goal of creating a form of travel faster than any plane, train, or automobile. 

In Musk’s original proposal, his hyperloop design depicted the pods with small hets of air on the bottom of each vessel, but according to Vox, most engineers now believe the use of magnets to generate pod levitation is the most effective form of propulsion for the hyperloop. Naturally, Musk, a man considered to be “arguably the most successful and important entrepreneur in the world” by the New York Times, decided it was only prudent to create an offshoot entity from his rocket-building SpaceX to develop hyperloop solutions exactly to his liking, and thus, the Boring Company came to life. 

Elon Musk founded The Boring Company in 2016 because of his strong belief that, after decades of 2D transportation using traditional roads, highways, and sidewalks, humanity deserved better. In an interview with Rolling Stone Magazine, he explained that an unfortunate fact of human nature is that when people make up their mind about something, whether this something is how they feel about a particular food or form of transportation, they tend not to change — “even when confronted with facts to the contrary.” It is the opinion of this online journalist that Elon Musk created the Boring Company to spite those who remain unchanged despite the presence of clear facts that would otherwise change their minds. 

The core mission behind the founding of the Boring Company was to create a mass network of tunnels with electric transit systems meant to alleviate the stresses caused by gridlock traffic. It wasn’t surprising that Musk announced that Los Angeles, California would be the first American city to reap the benefits of improved transportation. Several weeks ago, Musk tweeted a video of “the Boring Machine,” a play-on-words name for the tunneling device used to “bore” a hole for the hyperloop, breaking through to the first station in a planned network of tunnels under the city of Los Angeles. 

It seems as if Elon Musk could work on literally any project from his imagination and make it a complete success. Imagine if he decided, after building rockets, electric-fueled vehicles, and futuristic subterranean transports systems, to sell bricks, wouldn’t that be the most painfully ironic business venture one could think of? Well, knowing seemingly no bounds, Elon Musk gave the Boring Company its first subsidiary back in July, a new company called The Brick Store  LLC, purposed with producing and selling bricks. According to documents discovered by TechCrunch, Steve Davis, a former SpaceX engineer, filed the paperwork necessary to establish The Brick Store on Aug 29, 2018, basing the company in Burlingame, California. Interestingly enough, The Brick Store’s first physical location will be in an old kitchen cabinet shop in Hawthorne, California, several miles from Tesla (TSLA) HQ. The new location sits above an exit tunnel being dug by The Boring Company to extract the boring machine from its first test tunnel, according to TechCrunch. 

As far as the inventory for Musk’s new brick stores, he plans on using bricks already produced from The Boring Company’s test tunnel’s churned-up dirt. 

“The Boring Company is building a watchtower in LA out of dirt bricks & we need a knight to yell insults at people in a French accent.”

Elon Musk on Twitter 

Musk’s innovative use of tunnel refuse for brick production is not a new concept. Bricks made from plain-old soil are called compressed earth blocks (CEB), and this technology dates back thousands of years to the first standing structures built by native civilizations. 

If you tell Elon Musk that he cannot do something, or present him with a task that was previously considered to be unsolvable, he will undoubtedly prove you wrong. Tesla (TSLA), SpaceX, The Boring Company, and The Brick Store are just testaments to the fact that this man will innovate even if society refuses to change their opinion despite being confronted with facts to the contrary. 

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