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

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While the recommendation from the firm-adducing heating traditions and weather forecasts-for investing in oil business may sound plausible, a closer review shed light on a plethora of unwarranted assumptions made by the author. The validity of these assumptions are vital for the implementation and success of the investment.

To begin with, despite the tradition of using oil to heat in northeastern United States, the author assumes that oil will continue to be the major fuel source. There is no concrete evidence, however, showing the steady use of fuel for heating in the area. For example, as electricity becomes affordable to more people, it is probable that many residents are now switching to electricity for heating. It is also not unlikely that the government would dissuade citizens from using oil at home because it is environmentally unfriendly. Before these assumptions and many others alike are thoroughly considered, it would be reckless for the firm to make the general conclution that investing in oil-related fields are still profitable.

Additionally, another point in this argument that needs to be viewed with caution is that winters in the region are predicted to be colder than normal in coming years. In fact, it is unadvisable for the firm to accept the climate forecasters unconditionally, assuming that the claims made are accurate. Typically, weather reports can hardly be precise beyond several days, let alone for years. What is more, climate change and global warming are making the weather more unpredictable and warmer, even in winters. If this were the case, the argument of the author would definitely be dampened.

Last but not least, even if oil will remain the major fuel for heating in the area, it does not necessarily mean that investing in oil-related firms like Consolidated Industries are desired. In saying so, rather than evaluating some of the pertinent problems, the author made a bold assumption that the wield of oil for heating can always be transformed to profit. This notion can be proved wrong in many cases. For instance, if the oil price slumps, profit would certainly be limited for retailers. On the contrary, the heating devices using oil as energy source may become gain popularity among consumers under this circumstance. Therefore, recommending the client to invest in Consolidated Industries is as risky as it is ungrounded.

In sum, finding the trends and demands in the market does falicitate the investment firms. But before drawing any conclusion, it is imperative for the author to consider many related questions, instead of relying on intuitive and unwarranted assumptions.

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