JD DURKIN: A very good morning to all of you subscribers watching at home today. Chris joins me now to help answer some of your biggest questions from the last week. Chris, good morning.

But before we get there, it is, of course, the first day of a new month. I would be remiss not to check in on things to see how they stand. Of course, now that February is officially and finally behind us, what is your latest view on the market as well as the economy at large?

CHRIS VERSACE: So you are correct, JD. We are switching from one month to the next. It also means we're going to start to get a slew of economic data, really, for the month of February. And the context, as I see it, is this. The January data was clearly stronger than expected, both good and bad, right?

We saw the number of jobs created far greater than expected. But we also saw inflation data really raise some concerns about the course of Fed policy, leading the market to kind of really rethink what the course is for the Fed funds rate. But now we're going to start to shift into February.

And it's going to be an interesting compare-contrast relative to the January data. Is it still holding up stronger than expected, or are we starting to see it slow down in a more considerable fashion? These are the things that we'll be wrestling with really beginning today with the ISM and S&P Global final manufacturing PMI data, then later this week when we get the services data as well, and then, of course, next week the employment report.

So we're going to see a very busy set of days, a lot of recalibrating, potential rethinking about the speed of the economy, what we're likely to see out of the Fed, and of course, what that means not only for the market but for the accorded market P/E. So a lot of stuff coming. Could be volatile-- we're going to be right there, holding members' hands, navigating it all.

JD DURKIN: We will be holding hands. That's exactly what we want to hear, especially in light of the fact that next Friday, we will get that jobs report, the first since the 517 number. And we'll certainly see what February had in store.

Onward now to our questions of the morning, Chris. Let's start with what's probably a timely look at some of the club's more volatile insurance names, volatility insurance. We have some members wondering if it's time to start a position in one of the club's inverse ETFs if they haven't already done so. What are your thoughts?

CHRIS VERSACE: So remember, the technical members of the team have really been spot-on with where we've been kind of effectively trapped when we look at the S&P 500 between 3,800 and 4,100, 4,200. And with where we are right now, we're either right in the middle of it or, depending on where the market action is today, perhaps a little lower than that.

So I wouldn't necessarily chase those inverse ETFs here. If, however, we started to see one of two things-- the first would be if the market rebounds north of 4,100 on the S&P 500, maybe even closer to that 4,200 level, then I think it's appropriate to add a little bit to those inverse ETF positions. On the other hand, if the economic data that we just talked about kind of falls through the floor and a serious rethink happens, we'll revisit that thought with members.

And perhaps we might have to do a little more protection, adding to the portfolio. But the next round of data is going to tell us. Until then, watch where the S&P 500 goes.

JD DURKIN: All right, over to the world of retail now and its place in the broader economy. Chris, are bloated retail inventories deflationary?

CHRIS VERSACE: That's a great question. And we're hearing a lot about that this week with a slew of retailers who are busy working down their inventories in order to do so. What have we seen? Yes, margins have been taking it on the chin. Target was a great example of that.

So they are pricing things to move. So yes, that is a deflationary pressure, no question about it. However, as those inventories get worked through, that component of deflation will fade. So it's more temporary than persistent, which means that we need to continue to look at all the factors that Fed Chair Powell, the other Fed heads have been talking about, really the services economy ex-housing.

And so far, the data continues to be warmer than expected. The latest read that I saw out of the Cleveland Fed inflation casting model suggests that the February CPI could be joining its January counterpart and being a little warmer than expected. But again, we've got a lot of data over the next couple of days that will allow us to refine those expectations.

JD DURKIN: Chris, I've got to say, I really like the use of the phrase Fed heads. I've seen Dead and Company perform before. So I'm familiar with Deadheads. I don't if partying with Fed heads would be just as much fun but maybe for some market nerds like us. We would love that.

CHRIS VERSACE: They could be an interesting bunch. I mean, as I mentioned to you previously, when Fed Chair Powell was talking at the Economic Club of Washington, who knew the man loved to read spy fiction, play the guitar, and, if I remember correctly, ride his bike? So there's probably a little more interesting things going on among Kashkari and the others as well.

JD DURKIN: Mm-hmm, Dead and Company touring this summer with Jay Powell on guitar. Who knows? Maybe we'll see it.

All right, we do have another member wondering when you would add to the SPDR Gold shares ETF, Chris, which you currently have ranked as a two right now. What are your thoughts there?

CHRIS VERSACE: Yeah, so as we get this-- more of this data coming in and we get a better sense of what the Fed is likely to do-- will it be 25? Will it be 50? That's going to be the bigger decision as to whether or not we add more gold.

Right here, do we like it up to the price target? We do. Is there enough upside to potentially revisit the rating? There is. But for us, just like when we added shares to Axon a couple of weeks ago as well as some other positions, just because there's enough upside isn't enough. We really need to see either data or a well-defined catalyst to make that next move. So that's what we're waiting for.

JD DURKIN: All right, let's talk American Waterworks. Had a challenging February, to say the least, falling 11% month over month. Chris, for those wondering at home, why did you pick up more shares on Monday?

CHRIS VERSACE: Well, for two reasons. One, we've talked about this name before kind of trading in a band. And where we picked up the shares, it was right at the lower end of that band. So we thought that the entry point was good. We also know that we're heading into the seasonally stronger part of the year for American Waterworks that typically has a lot of operating leverage. And we tend to see the shares outperform there.

Remember too, members, American Waterworks has also talked about consistently increasing its dividend 7% to 9%. That's a nice step much higher not only in the dividend but typically in the share price as well. So given all those factors as well as the potential that the market rethink could get people nervous about the speed of the economy, we do like that very inelastic nature of the American Waterworks business. No matter what's going on, you need water every day. So those are some of the reasons behind why we opted to wade deeper into American Waterworks.

JD DURKIN: You certainly do. Stay hydrated, folks, don't forget. As interest rates rise, do you have any concern that Verizon's dividend yield will lose its charm? Your thoughts on Verizon.

CHRIS VERSACE: So let's step back, JD, for a second. And we have seen certain areas of the market kind of lose the enthusiasm that people had. One area is REITs because, as you pointed out, as interest rates move higher, it's a nice risk-free alternative to some of the other dividend-paying alternatives out there.

However, with Verizon, the dividend yield is still rather robust. And we continue to like it even more so with the shares pulling back of late. But let's remember why we originally added Verizon shares to the mix.

One was the dividend, yes. But the second, just like I said with American Waterworks, it was that inelastic business model because the company's products are essentially the connective bridge for our digital lifestyle. We don't see people abandoning that, especially in today's increasingly connected world and our increasingly connected lifestyles.

We do like that predictability with the business. And again, if we start to see the economy floundering here, we think that investors will kind of flock back not only to Verizon but to American Waterworks shares for those very reasons.

JD DURKIN: All right, Clear Secure reported earnings earlier today. But we have one member interested in a deeper look into the future. Chris, do you see the company expanding further into international travel?

CHRIS VERSACE: So that's a wonderful question. Typically the business is very domestic-focused. But the reality is, JD, that they've got so much opportunity, relative to their footprint, versus the number of domestic airports that, while they could go international, there might be some hurdles there with the approval process for their identity verification. There is ample opportunity here in the domestic market.

JD DURKIN: All right, let's end with a look in the bullpen. One member notice that Starbucks has been hanging out there for quite some time. Any update on our bullpen names, Chris?

CHRIS VERSACE: So we tend to look at the bullpen on a 30-45-day basis. Remember, the bullpen is where we want to keep tabs on companies that we are either interested in potentially adding to the portfolio. Not everybody graduates because there could be something that we're looking for, again, whether it's, like I mentioned earlier, specific data, a catalyst, or perhaps a pullback in the share price to make the risk-reward a little more compelling.

We tend to shake the bullpen up from time to time. And I anticipate that as we kind of put the first two months behind us of 2023, members will be seeing a few more adjustments, both some companies coming out of the bullpen and some new ones coming in.

We like to keep the mix kind of rolling a little bit. So I would say, members, stay tuned.

JD DURKIN: That's it. To the bullpen we go, whatever it is they do. Just watch that pitch clock this year, folks. That's going to do it. Thanks for taking the time to join me as always, Chris. Nice to have you.


JD DURKIN: And members, Chris will be back tomorrow for more on the stocks catching his attention this week. Have a great day. And we'll see you then.