THE FED: BETWEEN A ROCK AND A HARD PLACE John P. Bott, II Parallax Investments, LLC August 15, 2015 Investments L.L.C. 1

John P. Bott, II Tri-Star Group a division of Calton & Associates, Inc. President and Chief Investment Officer of Parallax Investments, LLC Parallax Investments, LLC Phone: Fax: Westheimer Suite 955 Houston, TX

Reasons To Raise 3

Unemployment Rate 4

US Auto Sales Total Annualized 5

Initial Jobless Claims 6

Monthly Gain in Nonfarm Payrolls 7

University of Michigan Consumer Sentiment 8

Reasons Not To Raise 9

Crude Oil Futures 10

CRB Commodity Index 11

Underemployment Rate (U6) 12

Underemployment Rate (U6) 13

Spread Between U6 and U3 14

Labor Force Participation Rate 15

US New One Family Houses Sold Annual Total 16

US Existing Home Sales (SAAR) 17

ISM Prices Paid 18

Export Price Index YoY % Change 19

Import Price Index YoY % Change 20

Producer Price Index YoY % Change 21

Consumer Price Index YoY % Change 22

Personal Consumption Expenditure Core Price Index YoY 23

What would be the short term effect of a raise? Lending would slow China’s drop in currency exchange rate will cause our imports to rise and our exports to fall The dollar would rise Stock Market may take a hit Multiple raises at a fast rate could lead to Cost inflation without product inflation behind it Even lower amounts of lending The next big crash How about the effect on government spending? 24

What would be the total effect of a raise? 25 Total of $3.9 trillion

26 $ trillion $ billion $101.4 billion $76.05 billion $101.4 billion Total of $2.535 trillion What would be the total effect of a raise?

27 Total of $1.131 trillion What would be the total effect of a raise?

28 At a cost of $234 billion in 2015 the government is currently paying off their debt at around 1.27% What does the cost become at 5% $917 billion per year What effect does this increase in debt cost have on the budget? What would be the total effect of a raise?

29 Total of $3.9 trillion What would be the total effect of a raise?

30 $ trillion $ billion $101.4 billion $76.05 billion $101.4 billion NO CHANGE Total of $2.535 trillion At 5 % Interest Rates What would be the total effect of a raise?

31 $ billion $11.31 billion $22.62 billion $33.93 billion $56.55 billion $67.86 billion $257.5 billion $4.68 billion $9.36 billion $14.04 billion $23.4 billion $28.08 billion At 5 % Interest Rates Total of $1.131 trillion Total of $468 billion What would be the total effect of a raise?

32 Will government cut spending? Exceed the current estimated budget, adding more to debt? Expected deficit on this budget would be $497 billion If interest rates raise and all programs are kept, total spending would go to $4.58 trillion and the deficit goes to $1.18 trillion. This pushes total debt to $19.5 trillion Potential loss of confidence in the dollar must be addressed What will GDP do? What would be the total effect of a raise?

US National Debt As of August 10 th 2015 US National Debt is $18,340,361,620,612 That is roughly $57,000 debt per citizen Or roughly $154,000 debt per taxpayer 33

WHAT I THINK THE FED SHOULD DO 34

WHAT I THINK THE FED WILL DO 35

Disclaimer The preceding presentation has been prepared for informational purposes only. It does not constitute an offer, recommendation, or solicitation to buy or sell, nor is it an official confirmation of terms. The above is based on information generally available to the public from sources reasonably believed to be reliable. Note that for any collateralized mortgage product, (CMO), the yield and average life will fluctuate depending on the actual rate at which mortgage holders prepay the mortgages underlying the CMO and changes in the current interest rates. Past performance is not indicative of future returns. Parallax investments, LLC makes no representations or warranties, express or implied as to the accuracy or completeness of the above information or that any returns indicated will be achieved. Parallax Investments, LLC is a Registered Investment Advisor, in the State of Texas, and offers securities through Calton & Associates, Inc. member FINRA/SIPC. Parallax Investments, LLC acts in a principal capacity when trading securities in your accounts through Calton & Associates, Inc. Investments L.L.C. 36