J.D. DURKIN: Good morning, subscribers. Chris Versace and I are now back with answers to some of your biggest questions of the week. Before we get there, let's start with this morning's CPI read here, Chris, Consumer Price Index. Now you've been telling members this result will be maybe a bit of an inflection point. Headline June CPI coming in up 2/10 of 1% month-over-month. That's slightly below expectations. How should the member at home interpret today's piece of data?

CHRIS VERSACE: Yeah, it's a really important piece of data. The market's trying to triangulate whether or not the Fed is going to stick to its playbook, which remember the most recent iteration of that says potentially two rate hikes in the back half of 2023. But the market has been a little less believing that, if you will.

We look at the CME fedwatch tool. It's been thinking, yeah, maybe just one more rate hike in July and the Fed can call it quits. So the market has been really looking forward to this data, looking to support that potentially bullish outlook. And as you noted, J.D. , when we looked at the June CPI, particularly the core June CPI both on a month-over-month and even on a year-over-year basis, it was a better than expected number.

And to be clear for members, that means it came in below expectations. And we laid out in a note to members earlier this week several reasons why we thought we would start to see some forward progress in the core CPI compared to the last three months. But, again, today's number for June was simply better than expected. And we're going to see folks that say, wow, if we annualize that 0.2% number, that's a 2.4% CPI print for core.

Wow, the Fed may not have to do much more. The concern I have with that is if we trace the core CPI numbers back over the last 18, 20 months, we've seen a lot of movement both up and down. And, as I just alluded to, some stalling, if you will. So I think the Fed is going to say this is some good progress, but we need to see more to be convinced that we will continue to move in the right direction as we try to get closer and closer to that 2% target.

We've got a lot of data coming at us later in July, later in August, and even in early September that will solidify that view. But today for the market, it's going to take what it sees as a win.

J.D. DURKIN: Chris, and that was my follow-up question. Correct me if I'm wrong, the Fed will need to have confidence in much more than just this one piece of data, this one data point, right?


J.D. DURKIN: All right, we'll kick off today's member questions with a look at the global economy. Chris, is the state of the Chinese economy concerning as it pertains to your overall view? What do you think?

CHRIS VERSACE: Well, look, we're trying to triangulate not only what's going on in the US economy, but really the global economy. And, of course, China has a very large presence in that. The key here is whether or not the much expected, highly anticipated post-COVID reopening is losing steam.

When we look back at some of the other economies when they opened up after the pandemic, there was a big surge in activity and then it normalized. I think the concern here is that we are seeing some softening in the PMI data that comes out every month. But we have to remember, too, that there's a lot of talk, increasingly so in the last few days, that China is going to restimulate its economy, get it back on that growth trajectory.

So am I concerned about it? I'm paying attention to it, no question. But I do think that the signs suggest that as more stimulus comes on, we might see that reacceleration. What I would be worried about is if China does make some stimulative efforts and we don't see any pickup in the data. That, again, would have me more worried.

J.D. DURKIN: Over to our inverse ETF positions. Given the more positive view, Chris, of the economy that has been emerging, albeit maybe a bit slowly, but it has been emerging, why is the club holding on to its positions in SH as well as PSQ? And what are those names for people who might be a bit unfamiliar?

CHRIS VERSACE: So you're referring to our inverse ETFs. The ProShares short S&P 500 SH, and then its cousin, if you will, the short ETF for the NASDAQ. And in the near term as we move into earnings season, which could be a little disruptive to the market, we are going to continue to hold those ETFs.

Remember, the market, too, currently remains range bound. So until we get a sense that we're going to pop out of that on a sustained basis, we're likely to continue to hold those inverse ETFs. But I will say, though, and I've shared this in some notes with members. I think we've talked about it here in some recent rundowns as well is that as we reassess the pace of the economy and it continues, as you pointed out, to look stronger than expected, we are taking a hard look at some of our more defensive positions.

These could include everything from Verizon to gold to even CBOE global markets. With that last one, if we see volatility really coming down and, again, poised to be there on a sustained basis, that might be a position that we've had a great run, but at some point, we'll look to trim back.

J.D. DURKIN: All right, let me ask you about this unflattering series of headlines with regards to B of A. Yesterday, we learned Bank of America was fined by the Consumer Financial Protection Bureau, the CFPB, after the bank, quote, wrongfully withheld credit card rewards, double dipped on fees, and opened accounts without consent, at least according to the agency. The stock didn't really have much of an impact in yesterday's trading, but I wonder how concerning this is for you in terms of the club's position in B of A.

CHRIS VERSACE: So let's separate two things. The one operating performance of the business, and then let's just call this bad behavior because that's really what it is. I think the market's reaction is probably the right one. You noted that it didn't really move one way or the other based on this news. I think we're more concerned about what it has to say about loan growth, the investment banking business, and those types of things that will drop earnings to the bottom line.

Again, typically, not to dismiss the bad behavior, it's going to result in a fine. There will be some rapping of the knuckles likely inside of Bank of America, and then we'll move on. But, again, I think the key this week for Bank of America is what we hear on Friday. JP Morgan, Wells Fargo, Citibank. Those reports will set the tone for what we hear from Bank of America next week.

J.D. DURKIN: Time to talk about ChargePoint. It's my favorite time of the day. We've talked about the company's ability to compete previously. But, Chris, give us a bit of a refresher on how ChargePoint stacks up to Tesla's charging network.

CHRIS VERSACE: So both companies are going to report their earnings in a couple of weeks. And we'll get updated landscapes, if you will, for the respective charging stations. But if we review the numbers at the end of March, Tesla had about 45,000 charge points. No pun intended there. ChargePoint, on the other hand, had about 240,000 charge points.

So there's been a lot of headlines about the industry migrating towards the Tesla standard, if you will, for charging. personally, I think that's great. There were two dueling standards. And as we've talked about in the past, when any one industry finally solidifies around an industry standard, that really allows companies to come in, the industry to flourish, and just faster rollout, greater adoption.

So I actually think that's a positive. And let's remember, too, that ChargePoint has said, yes, we are adopting that standard. Yes, we are going to retrofit our existing charging stations for it. So from a pure scale perspective on charging, you have to go with ChargePoint because it's 240,000 to 45,000. That's if my math is close, almost five to one.

J.D. DURKIN: Finally, Chris, we have a member wondering if the club was maybe a little bit early when it came to starting positions in younger companies like ChargePoint as well as Clear Secure. Remind us of your strategy there. What went into your thinking?

CHRIS VERSACE: So I think the criticism, again, hindsight being a little 2020 for ChargePoint, us being maybe a little premature is fair. I say that because there was a lot of excitement around EV adoption and we saw those numbers kind of rolling out. And at the same time, the big part of the catalyst was the incremental spending from the Biden infrastructure law.

But as we saw with our shares of Vulcan Materials, United Rentals several months ago, it really took a lot more time than expected for the flow of funds to get rolling. But now they are, and we're seeing that really reflected in the construction spending data. And those shares have catapulted higher, to be fair.

So were we likely early on ChargePoint? We were. But that doesn't mean we're going to throw in the towel now because we are starting to see signs that flow of funding for charging stations is happening. I think we're going to have a better second half of the year, probably an even stronger 2024. So what I would say to members is let's be patient. Let's let the thesis play out. Let the funding flow. And, hopefully, we'll have better days ahead.

J.D. DURKIN: Hopefully, we will. Thank you for taking the time. Chris Versace, nice to have you here as always.

CHRIS VERSACE: Thank you, J.D. . Always look forward to it.

J.D. DURKIN: Absolutely. As do I. All right, folks, and thank you as well for taking the time to watch. If you have a question that you would like to see us address, please email us that question. You can do so over at aapclub@thestreet.com. Mr. Versace will be back tomorrow with a further look at what he is following for this week. We'll see you then.