GRE Argument Topic 142

NOTE: The above topic has wording similar to Argument Tasks 57, 138, 139, 146 and 147 of this Website. However, if you read carefully you will notice that the topic and the task instructions are different. Hence, it is very important to read the topic as well as its instructions completely before you start to write your response.

Sample 1:

The average working man or woman has too little time or knowledge to navigate the ins and outs of the stock market, and most rely on the advice of a financial planner. It is easier to simply put one's money where the planner recommends. The smart investor asks questions, and he or she should before buying stock in Consolidated Industries. The answers to those questions will lead the investor to agree with the planner or decide to dive into another industry altogether.

The investment adviser assumes that new homes built in the northeast will use oil for heat. Are other types of heating systems becoming more prevalent? The rising cost of heating fuel has led homeowners to supplement oil with pellet stoves or heat pumps or, perhaps even solar panels. Builders of new homes may have to install these in order to appeal to modern consumers, many of whom want to reduce this country's dependence on foreign oil.

Have the home builders taken any other steps to reduce heating costs? They may have oriented the homes to take advantage of passive solar heat so that, on sunny days, the rooms where families spend most of their time will be warmed by the sun, reducing the number of hours that homeowners will need to run the furnace. Builders are able to select from a variety of components that reduce energy consumption. Double-pane, low-E windows prevent heat from escaping the house in the winter; a variety of insulating materials keep cold air out.

How far below average were the temperatures last year, and did those days occur during the winter? If those days were one degree below average, they did not make a significant contribution to heating costs. If a chunk of those days occurred during the summer months, they probably had little impact on oil consumption. If they occurred during the winter months and were several degrees below average, they would have increased the amount of time that homeowners turned their furnaces up, causing more gallons of fuel to be burned.

In addition to answers about the likelihood of increased oil sales in the northeast, the investor needs answers to questions about Consolidated Industries itself. How big a portion of the company's holdings are in heating fuel? Even though the financial planner cites heating oil as one of Consolidated's major holdings, he may have failed to mention that it is one of many major industries in which Consolidated has an interest. How is Consolidated Industries performing overall? Even though its oil division may be very profitable, its other holdings may be under performing, making an investment in Consolidated an unwise decision. In contrast, Consolidated's other holdings may be profitable enough to make it a sound investment even if heating oil experiences either a dip in price or a decline in consumption.

Once this client has answers to these questions, he or she can make a more informed decision about the investment. Before jumping on board this investor should also consider how his advisor has performed for him or her in the past and how an investment in Consolidated Industries fits with the other stocks in his or her portfolio. How does this investment help or hinder the client's financial goals? Will it help him send his children to college or make possible an earlier, more comfortable retirement? The client may want a rapid return in order to meet some short-term goals. Does the client even have the necessary funds to invest? He may have other commitments to meet at present. If the answers are satisfying, he should hand his money over to the financial planner.

Sample 2:

This letter from an investment advisory firm predicts an increased demand for heating oil in the northeastern United States and therefore, they advise their client to invest in Consolidated Industries which deals in the retail sale of home heating oil. The arguer states that the northeastern states have cold winters and oil is used as the main fuel for heating homes. Furthermore, these states saw 90 days in the past year when the temperature was below-average and it has been forecasted that this weather pattern will continue for many more years. The arguer claims that the construction of new homes in this region adds to the above mentioned reasons for an increase in the demand for heating oil. The argument seems convincing when it is given a cursory reading, but an in-depth analysis reveals several logical fallacies that have rendered the argument indefensible.

A major lacuna in the given argument is the unjustified assumption that the residents of the northeastern region will need more heating oil in case the weather remains the same for the next several years. It is likely that the people may switch to other forms of central heating facilities or they may not need any additional oil as the oil being used by them is sufficient for heating their homes. Moreover, the construction of new homes indicates the possibility of some other modern heating system being installed that is probably electrical and does not require the use of heating oil at all. Therefore, the assumption that there will be an increase in the demand for heating oil in the northeastern region is unwarranted.

Another lacuna in the given argument is that the arguer has unfairly assumed that Consolidated Industries caters exclusively for the northeastern states of the US. It is highly probable that Consolidated Industries supplies heating oil to other parts of the country. At the same time, it is likely that the residents of the northeastern states do not use the heating oil marketed by Consolidated Industries. There may be other local industries in the northeastern region that provide heating oil which is more popular with the residents of this region. Therefore, neither the cold winters nor the construction of new homes in the northeastern region may be instrumental in affecting either the sales of Consolidated Industries or the demand for its heating oil.

On the contrary, it is likely that Consolidated Industries is facing losses as they supply heating oil to a region that does not require the same. It is also likely that the oil manufactured by Consolidated Industries is used more often by factories and industries as compared to homes. Moreover, as the arguer makes no mention of the present sales statistics of Consolidated Industries, it would be unreasonable to assume that the demand of heating oil marketed by the company is on the rise.

Even if we assume that there is an increase in the demand for heating oil in the northeastern region and that Consolidated Industries is the sole provider for heating oil in that region, the arguer cannot make the hasty recommendation that one should invest in Consolidated Industries. This is because it is not necessary that catering to an increase in demand would lead to profits for the company. The company may require additional manufacturing units, more raw materials, additional workers etc. In the absence of detailed information on the finances involved in manufacturing the additional heating oil and the profits brought in by the sale of the heating oil, one cannot be convinced that the investments would easily be recovered and that the company will have good profits. In view of the above, the advice given by the arguer seems extremely unreasonable.

In sum, the inference drawn by the arguer is fallacious, at least without additional evidence to support it. The arguer needs to bolster the argument with information related to the sales statistics of Consolidated Industries including the region where it operates. Moreover, there is the requirement of evidence that can prove that the cold weather would actually lead to an increase in the demand for heating oil.