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>>News Anchor: James Shelton,he is Chief Investment Officer at Kanaly Trust and he joins us now
from Houston and helps to manage $1.9 billion in assets. James, welcome. What do you think
about what is going on with the banking group?
>>James Shelton: Well I think investors are grappling with what the ultimate exposure
is going to be for some of these banks. In addition to all the credit losses and write
downs that we have seen I think investors are also wondering what will be the future
earning power of some of these banks given that we have seen this collapse of prime market
that drove a lot of earnings growth in the last few years.
>>News Anchor: We just had a guest on earlier James talking about Goldman Sachs actually
as a stock pick. I mean, do you think there are some companies who's argument was that
Goldman is managing some of their subprime losses better than their competitors, for
example Citi. So do you think within the group there are companies managing better?
>>James Shelton: I think there's no question that companies like Goldman have done a better
job in this environment but I think investors area still very concerned over what that ultimate
impact is going to be and I think it's going to take some time before we know what the
true losses are going to be here and move on past that.
>>News Anchor: James not too much time left but later this week there's sort of shift
in accounting. Were gonna see a little bit more of level 3 assets of what banks have
on their books. Is that going to be important for sentiment or not?
>>James Shelton: Uh, I think there's no question that it's going to be important for sentiment.
I think all of that volatility that we have seen over the last few weeks has just been
centered around what's going on with the banks. So any new news that we get regarding level
3 is going to be important.
>>News Anchor: Alright James we are going to take the bell right now but hopefully you
will sit tight and we will come back to you shortly.
>>News Anchor: We are backer right now with James Shelton. He is the Chief Investment
Officer at Kanaly Trust. Thanks very much James for staying with us. What do you thing
about the DOW being below $13,000?
>>James Shelton: I think it's a little bit of a disappointment after some of the strength
we had this morning. But we still think that investors are being a little bit too pessimistic
at this point. We are starting to see some good opportunities emerge in this market.
>>News Anchor: So, good opportunities? Just recap for us. We know earlier you made a few
but as far as general groups go where are they?
>> James Shelton: Well I think it's, you have to focus on very high quality companies in
this type of market environment. Those companies that have very strong balance sheets, lots
of good cash flow generation that don't have the need to tap into the credit markets at
this point of time. A lot of those names are found in large cap stocks. Particular large
cap growths within the industrials and technology sectors.
>>News Anchor: Do you make anything of the NASDAQ also actually on the verge really of
joining the SMP and the DOW moving below the 200 day moving average?
>>James Shelton: Yes, text have been very weak here recently. I think investors are
selling a lot of the names that have worked very well on a year to day bases. But a lot
of these companies are generating a tremendous amount of cash flow and valuations look pretty
attractive to us. So I think there are some select opportunities that are merging in the
technology sector.
>>News Anchor: And you don't think,okay. Okay so you do think there are opportunities in
tech. And overall the volatility here to stay or not?
>>James Shelton: I think the volatility is here to stay at least for a few more months
here as investors try to come to grips with what the ultimate impact is going to be in
the subprime crisis.
>>News Anchor: ALright James thanks so much. James Shelton, Kanaly Trust.