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

At first glance, the client’s claim that investors should pay attention to Consolidated Industries because the demand of oil would increase in the northeastern United States seems reasonable. However, this argument not only suffers from logical flaws but also it bases its conclusion upon several questionable assumptions. Before the investors arrive at the final conclusion, he needs to clarify the following points.

In the first place, the clients referred to the weather forecast that predicted that it would be colder than usual for coming several years. However, other weather forecasts are not taken into consideration in this argument. Perhaps, another weather forecast did not predict that it would be cold. Besides, it is possible that some forecasters foresaw that it would be even warmer than usual. The client needs to provide the evidence that proves that it would be colder than average for several years.

In the second place, the author pointed out that oil has been used as major fuel for heating in the northeastern United States. Nevertheless, basing his argument on this assumption is not credible because there are varieties of ways to make rooms warmer nowadays. Not only oil heater but also air-conditioner and electric stoves are possibly used now. Moreover, some residents may use even stoves with timber. The evidence that endorses that most residents in the northeastern United States still use oil heater is needed to verify the credibility of his argument.

In the third place, the client recommended to invest in Consolidated Industries that run the retail sale of home heating oil. Nonetheless, the business field of Consolidated Industries are not concerned in his argument. Consolidated Industries may run its business in the northwestern United States. Moreover, even if Consolidated Industries run oil business in the northeastern United States, there may be a lot of competitors there. The client has to show the possibility that Consolidated Industries would succeed in oil business in the northwestern United States.

Finally, even assuming these are all refutable by additional information provided by the client, his argument is still doubtful. No information about other field of Consolidated Industries was not provided. Consolidated Industries may have huge debt in another business. If so, Consolidated Industries would bankrupt even if the oil business in the northeastern United States succeeds. To verify the credibility of his argument, it is mandatory to provide the current fiscal condition of Consolidated Industries.

As discussed above, the client’s claim is based on several assumptions that are not sufficiently supported. Before the investors make the final conclusion, they should acknowledge that there are many factors that are involved in this story, and undertake additional investigations to clarify uncertainties pointed out above.