Alternative Investment Opportunities Through a Slowing Economy

If you buy options, themaximumloss is thepremium. If you sell putoptions, therisk is the entire notional belowthe strike. If you sell call options, therisk is unlimited. The actual profit or loss from any trade will depend on theprice atwhich thetrades are executed. Theprices used herein arehistorical andmay notbe availablewhen you order isentered. Commissionsand other transaction costsarenot considered in theseexamples. Optiontrades in general and these trades in particularmaynotbeappropriate for every investor. Unlessnoted otherwise, thesourceof all graphsand tables in this report isCiti. Because of the importance of taxconsiderations to all option transactions, theinvestor consideringoptionsshould consultwith his/her tax advisor as to how their taxsituation isaffected by theoutcome of contemplated options transactions. 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Bonds are affected byanumber of risks, including fluctuations in interest rates, credit risk and prepayment risk. In general, as prevailing interest rates rise, fixed incomesecuritiespriceswill fall. Bonds face credit risk if a declinein an issuer’s credit rating, or creditworthiness, causesa bond’sprice to decline. High yield bondsaresubject to additional riskssuchas increased risk of defaultand greater volatilitybecause of the lower creditqualityof the issues. Finally, bonds can be subject to prepayment risk.When interest rates fall, an issuermaychoose toborrow money at alower interest rate,while paying off itspreviously issued bonds. As a consequence, underlying bonds will lose the interestpayments from the investment andwill beforced to reinvest in a marketwhereprevailing interest rates are lower thanwhen the initial investment wasmade. Disclosures (MLP’s) - EnergyRelatedMLPsMay ExhibitHigh Volatility.While nothistorically very volatile, incertainmarket environmentsEnergyRelatedMLPSmay exhibit high volatility. Changes in Regulatoryor Tax Treatmentof EnergyRelatedMLPs. If the IRSchanges the current tax treatment of the master limited partnerships included in theBasket of EnergyRelated MLPs thereby subjecting them to higher rates of taxation, or if other regulatoryauthoritiesenact regulationswhichnegativelyaffect theabilityof the master limited partnerships to generate income or distribute dividends toholders of common units, thereturn on theNotes, if any, could bedramatically reduced. Investment in abasketof EnergyRelatedMLPsmay exposethe investor to concentration risk dueto industry, geographical, political, and regulatoryconcentration. Mortgage-backed securities ("MBS"),which includecollateralizedmortgageobligations ("CMOs"), also referred to as real estatemortgage investment conduits ("REMICs"),maynot be suitable for all investors. There is thepossibilityof early returnof principal duetomortgage prepayments,whichcan reduce expected yield andresult in reinvestment risk. Conversely, returnof principal maybe slower than initial prepayment speed assumptions, extendingtheaveragelifeof thesecurityup to its listedmaturitydate (also referred to asextension risk). Additionally, theunderlying collateral supportingnon-AgencyMBSmaydefaulton principal and interestpayments. In certain cases, thiscould causetheincome streamof thesecurity to decline and result in lossof principal. Further, an insufficient level of credit supportmay result in adowngrade of amortgage bond'scredit rating and lead to ahigher probabilityof principal loss and increased pricevolatility. Investments in subordinatedMBS involve greater credit risk of default than thesenior classes of the same issue. Default risk maybepronounced in caseswhere the MBS security issecured by, or evidencing an interest in, a relatively small or lessdiverse pool of underlying mortgageloans. WEALTH OUTLOOK 2023 | MID-YEAR EDITION │ ALTERNATIVE INVESTMENTS | 36