154The 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 experie

The author recommends the company to invest Consolidated Industries whose major business is retail sale of home heating oil based on the prediction of future weather patterns and newly built homes in this region. Although the recommendation seems plausible and beneficial to the company at the first glance, however, there are still several questions left waiting for the author to answer. Or, the suggestion may too vulnerable and dubious to bring the expected outcomes.

First, the author assumes that low temperature pattern will cause more needs on the oil assumption. However, the questions here are what exactly the degree of last year was lower than the average temperature and how much oil consumed last year? If the temperature just dropped two or three degrees, people would not feel much different, and there would no need about extra fuel for heating. Maybe there will be a trend of cold weather pattern that may continue several years, however, if decreasing level of degree remains constant like last year, existent oil supply will be adequate. Unless the author replies the general scope that temperature will drop, more oil supply may not seem a necessary.

Second, due to the fact that new homes have been built in this region during the past year, the author predict that more oil should be requested. Although the premise of the weather pattern mentioned is established, can the author make sure that new homes will be claimed by the customers within years and there will be no other new heating technologies appear in years. There is no details that mention the conditions of the real estate market in this region and the information of the new homes such as their locations, qualities and surrounding facilities. Then the author cannot affirms that those new homes will be welcomed by customers. In addition, under the huge development of high-technology, more convenient and economical appliances are invented. There will be no way that same heating way still be kept in the future. It can not be totally disappeared, however, the consumption may decrease. Besides, people nowadays are more aware of environmental protection and they tend to choose heating system without the need of burning fossil fuels that will cause severe air pollution. Therefore, the author need to considerate the condition of other fields and can not neglect the development of the society.

Finally, investment is a huge and far-reaching decision to make for any companies, without comparison with any other business operations to jump a conclusion seems not too responsible. There is not much information about Consolidated Industries like how about its performance past years and its future development such basic questions as these. Then the author cannot convincingly persuade the company to distribute a large fortune on it.

To sum up, the recommendation about an investment to an oil retail sale operation is fallible due to its shaky assumptions. The author overlooks the potential questions hidden behind which are also indispensable for such a significant investment. To strengthen the reliability and persuasiveness, the author should offer more accurate weather pattern in the long run and the potential technological revolution, as well as the detailed information of CI and the comparative results with other operations. Or there will be a high risk of wasting money.