I'M WEIGHING IN AS SCRAPPING
SWIMSUITS IS THE RIGHT THING TO
DO.
DOES THAT SURPRISE YOU?
THAT IS COMING UP.
>>> STOCKS TRADING HIGHER ON
HEELS OF LARRY KUDLOW'S REMARKS.
MOODY'S CHIEF ECONOMIST
JOHN LONSKI.
I KNOW LARRY WELL.
I HAVE KNOWN HIM FOR MANY YEARS.
I ACTUALLY USED TO DO A SHOW
TOGETHER ON SOME OTHER NETWORK
WAY OVER IN NEW JERSEY I THINK.
ANYWAY, HE IS ALWAYS BEEN
POSITIVE.
I MEAN EVEN AT TIMES WHEN THINGS
LOOKED LIKE THEY MIGHT BE
GETTING ROUGH, LARRY ALWAYS HAD
A POSITIVE OUTLOOK ON.
BUT RIGHT NOW, I REALLY THINK HE
IS JUSTIFIED.
I MEAN THERE IS, THERE IS A LOT
TO BE EXCITED ABOUT.
SO, WHAT DO YOU THINK, JOHN?
DO YOU AGREE WITH HIS
ASSESSMENT?
>> I AGREE WITH HIS ASSESSMENT.
WORRIES OVER TRADE ARE OVERDONE.
COOLER HEADS ARE GOING TO
PREVAIL.
WE ARE GOING TO AVOID A TRADE
WAR THAT OTHERWISE COULD DO A
GREAT DEAL OF DAMAGE TO GLOBAL
ECONOMIC ACTIVITY.
I LIKE THE FACT THAT LABOR
MARKET IS EXPANDING.
MY ONLY WORRY IS THAT INTEREST
RATES MIGHT GET AHEAD OF
THEMSELVES.
MOREOVER, I'M ALSO CONCERNED
THAT SOME BUSINESSES MAY
OVERESTIMATE THEIR PRICING POWER
TRISH: WHAT DO YOU MEAN BY THAT?
>> BY THAT I MEAN BUSINESSES
HEAR ALL THE TALK ABOUT
INFLATION MOVING HIGHER.
IN THE PAST THEY WERE INCREASING
PRICES 1 1/2 TWO, 1/2% AND DOING
QUITE WELL, THEY NOW BELIEVE
THEY CAN GO AHEAD AND HIKE
PRICES BY 3% OR 5% BUT THEY WILL
DID DISCOVER CONSUMER INCOMES
ARE NOT GROWING RAPIDLY ENOUGH.
TRISH: IF YOU OWN A STORE,
THINGS ARE LOOKING GOOD.
MARKET'S UP I WILL CHARGE MORE
AND NOBODY BUYS YOUR STUFF I
THINK YOU WOULD PRETTY QUICKLY
SAY INVENTORY ON SALE.
>> WHAT DO YOU DO?
INVENTORIES MOUNT, CUT PRICES.
>> OKAY.
SO A LITTLE BIT AFTER
SELF-CORRECTIVE PROCESS.
TALK ABOUT A THREAT OF SO-CALLED
TRADE WAR.
I THINK IT IS NOT AS HARD AS
EVERYONE IS MAKING IT.
BECAUSE WE'RE CHINA'S BIGGEST
CUSTOMER, RIGHT WE'RE EVERYONE'S
BIGGEST CUSTOMER.
THE CUSTOMER IS ALWAYS RIGHT.
DEMANDS OF TRUMP ADMINISTRATION
AS FAR AS OPENING UP ITS ECONOMY
TO U.S. EXPORTS AND AS FAR AS
NOT DEMANDING DOING BUSINESS IN
CHINA, HANDING OVER TRADE
SECRETS.
TRISH: HOW LONG DOES THIS PLAY
OUT?
THERE IS POLITICAL RISK FOR THE
PRESIDENT AND REPUBLICAN PARTY
IN MIDTERMS.
IF PRICES GO UP IN WALMART, YOU
CAN'T BUY AS MANY CHEAP WIDGETS
ANYMORE, YOU WILL NOT LIKE IT
VERY MUCH.
>> THAT IS WHY THE
ADMINISTRATION IS UNLIKELY TO
PUB VERY HARD ON THE TRADE FRONT
IF DOING SEW FRIGHTENS THE
EQUITY MARKET.
IN RESPONSE TO TRADE FEARS, TELL
THE ADMINISTRATION, COOL IT.
INTERNATIONAL TRADE IS FUNNY.
THE BENEFIT FROM TRADE TEND TO
BE BROADLY DISPERSED.
THE COST OF TRADE, FREE TRADE,
TEND TO BE HIGHLY CONCENTRATED.
SO IT BEHOOVES THE
ADMINISTRATION, COSTLY FRONT,
PROMPTING PRICE HIKES WOULD BE
RUIN NEWS FOR THE MIDTERM
ELECTIONS.
TRISH: THAT SAID, IF THEY CALL
YOUR BLUFF, YOU HAVE TO BE
WILLING, PART OF THE
NEGOTIATION.
WILLING TO WALK AWAY.
>> THAT'S TRUE.
TRISH: SO DONALD TRUMP CAN'T
SAY, HEY, YOU KNOW, WE'LL BE
THREATENING THIS.
THEY WILL THREATEN THIS.
IF YOU'RE NOT WILLING TO FOLLOW
THROUGH YOU WILL HAVE A BIG
PROBLEM.
MAYBE IT COMES WITH POLITICAL
RISK.
YOU HAVE TO MEAN WHAT THEY SAY.
>> AS IMPLIES YOU HAVE TO KNOW
WHEN TO FOLD THEM, GET READY FOR
THE NEXT ROUND.