The following appeared in a letter from a firm providing investment advice to a client."Homes in the northeastern United States, where winters are typically cold, have traditionally used oil as their major fuel for heating. Last year that region experienc

According to the text, the firm recommends its client to invest Consolidated Industries with the prediction on the increasing demand of heating oil in the coming future. This argument depends on several unsubstantiated assumptions and is therefore unpersuasive as it stands.

Firstly, the firm indicates that oil is used pervasively and traditionally as major fuel for heating in the northeastern United States. As technology advanced rapidly day by day, new fuel for heating can be invented or discovered in anytime in the coming future. With characteristic of cheaper and effective performance, heating oil can be replaced by the new fuel and be accepted by residents easily. Take the car gas as example, fossil oil used to be the major and indispensible resource as the fuel for car. In recent year, as the development of electricity usage has been improved, hybrid car is invented, coming with electricity car(Tesla) launched to the market. With the alternative energy source invented, fossil oil is not the only source of car gas anymore and thus causes the price of oil drop in the worldwide market. The firm also need to take the emerge of new fuel need to be taken into account while making the recommendation to its client.

Secondly, the firm mentions that there will be below-normal temperature phenomenon occurs according to climate forecaster prediction thus to increase the need of heating oil. The forecaster prediction is always inference which cannot be promised to be occurred following the prediction 100% in the future. Although the climate forecaster prediction is based on past experience and professional analysis to the future, there is still probability that the cold weather may not be long lasting for several more years. For instance, Taiwanese climate forecaster usually provide climate prediction for the coming 10 days for people’s reference, the accuracy of the prediction usually not so high that people seldom really take the prediction into account while choosing what to wear for that coming 10 days. It is important for the firm to validate the accuracy of the climate prediction.

Thirdly, in the text the firm proposed that there are new houses under constructing in the region for the increasing population which will lead to the increasing demanding of heating oil. The increasing new houses do not guarantee more people will move in after new housed are built. Several factors may lead to the new houses vacant, like people may be moving out the city due to there are more job opportunities in other places, or the price of these new houses are not affordable to most of people in the region so that those houses will be left vacant. The price of the houses and job trend in the region are also important factors for the firm to confirm before making conclusion.

The last but not the least, even if the demand of heating oil is increasing stably in the coming years, the firm does not take competitor to Consolidated Industries into account while convincing its client to invest. There is no evidence showing that Consolidated Industries is the only company which operates retail sale of home heating oil in the region as monopoly. Competitor can pose potential threat in the market share which affects profits and dividends that allocate to client. For example, there are several on line searching engine like Google, Yahoo, BaiDu which provide user in the world to search and find information they need from internet. As user has preference to different searching engine company, the market share are divided into pieces. It is necessary for the firm to assess what the effect will be competitor bring on.

To make the argument more convincing, the firm must address the above questions