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Mark Haines: What do we got? What do we got? Oh, yea Drew Kanaly Chairman of Kanaly Trust
Company who maintains the economy, is better then what most people think. He trusts the
2007 rally but cautions next year is another matter. Joining us from Houston, Texas to
talk market this morning, Drew Kanaly Chairman of Kanaly Trust. Good Morning Drew thanks
for being with us.
Drew Kanaly: Good morning Mark.
Mark Haines: So you're optimistic about the short term but not the long term?
Drew Kanaly: Sure, I mean the subprime boogeyman didn't get us after all. The the worries of
July and August are behind us. Fasten your seat belts because it's earning season coming
up.
Mark Haines: Yea and you're expecting what from earning season?
Drew Kanaly: Well the past several years earnings have been under estimated and their going
to be under estimated again. So we are looking for earning surprises this season once more.
Erin Burnett: Alright Drew. You have a couple top picks right now, on that list is Hess
and 3M?
Drew Kanaly: Yea and Hess of course is just the energy play and strong demand and 3M is
the dollar and foreign sales. We have made another move, we've moved away from gold and
more into emerging markets.
Erin Burnett: Into emerging markets, Hess into an emerging markets exactly how?
Drew Kanaly: Well what we've done is for now we're using an ETF that excludes China from
the mix because we still haven't overweighted China but it's starting to look sorta pricy
at this point.
Mark Haines: And you don't like consumer discretionary right? Retail and stuff like that.
Drew Kanaly: Well Tiffany looks fine to us but that's sure at the upper end of the market
for sure. But the other retailers are still suffering.
Mark Haines: Alright so you stay away from them. Do you buy Tiffany?
Drew Kanaly: Sure you buy Tiffany, it's part of the global play. They still got a waiting
line in the Hong Kong store. Tiffany's going to hang in there.
Erin Burnett: I just want to jump in with a follow up on that, obviously if Europeans
come into the U.S. they will buy the flagship store because of the dollar. It is an aspirational
brand but aren't the likes of Tiffany and Coach, Drew, exact sorts of brands that you
start to see some on pressure on if you did have an economic slowdown? If they are aspirational
we aren't taking super super high-end, it's almost mid high-end.
Drew Kanaly: You're still talking about these global markets are pulling the wagon for everyone.
From a Boeing to a Tiffany. This is part of a phenomenon that absoultely overwhelms these
subprime worries. Thats why we are where we are. This will continue until the year end.
Mark Haines: Okay, do you think the economy is better off then most people think. I suppose
Friday's jobs number supported your view.
Drew Kanaly: It did. See what's driving the market still is we still have good tax policy,
good trade policy, good regulatory policy and improving FED policy. We just had a little
credit worries. Now going into next year some of those things are going to come under pressure
in this election year rhetoric.
Mark Haines: Okay and the FED? Do you think they are done? DO you think they should do
more or what?
Drew Kanaly: Well there's what they can do, what they should do, and what they will do.
What they can do is lower rates again. The 91 day T Bill is still at 3 point 9 something,
FED funds at 4 and a quarter, there's a lot of room there. What they should probably do
is close that gap a little bit and take some mystery out of the market. What they will
do is another matter entirely. I think their probably watching earnings and commodity prices
like we are.
Mark Haines: Alright Drew thanks a lot, appreciate your time.
Drew Kanaly: Thank you Mark. Thank you Erin.
Mark Haines: Drew Kanaly down in Houston.