James was looking at the Khajiit that was sitting with the Altmer woman, then turned around to look back at the mysterious man, now appearing to examine a steel dagger. James was about to say something when the man asked "James is it?" 
"How do you know..." James began, but stopped. His eyes darted to where his dagger [i]was[/i], and his hands reached for the weapon, only to find that it wasn't there. James did a glance at the entire room, then his eyes locked on the dagger that the man was examining. It was a steel dagger, it had the name 'James' on the blade.
[i]That was James' dagger.[/i]
Once the man put the dagger down, James reached across and gingerly took the dagger, slipping it back into his clothes. "How did you manage to take that without me noticing?" James asked, then thought about what the man said not more than a minute ago. "Oh. Distraction." James said, letting a tiny smile show as he leaned back in his chair.