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Davide
- Junior | Next Rank: 30 Posts
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- Joined: Tue Nov 06, 2012 2:53 am
- Location: Salerno, Italy
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ESSAY QUESTION:
The following appeared in a strategy memorandum of an investment company:
"Over the past several years, investment in precious metals, such as gold and silver, has proven to be one of the most profitable investment strategies for our firm. Over the next decade, the demand for these metals is expected to be strong, largely driven by the economic growth of large emerging markets--China, India, and Russia. Thus, our investors are best served by increasing their exposure to precious metals to take advantage of this unique profit-making opportunity."
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
RESPONSE:
The claim made by the author is about the importance of precious metals - mainly gold and silver - as an investment; given the high profits recorded over the past years by that firm, the author recommends increasing the exposure of their investors to the gold and silver market in order to increase profits due to a supposedly stronger demand, which should be due to the economic growth of some emerging markets. This plan presents several flaws, which are discussed below.
To start with, the author is not addressing why investing in precious metals is so profitable: is it because of a steadily increasing demand, or maybe because gold and silver natural reserves have been almost completely spoiled? What is more, nothing has been said about special circumstances that might have led to high profits.
Second, the author simply states that the demand for precious metals is expected to be strong, but no evidence has been included; therefore, it cannot be assessed whether this strong demand over the next 10 years may be sufficient to generate high profits. In addition, a correlation between economic growth of countries - such as China and India - and a strong demand for precious metals has been highlighted, but there is no evidence that supports this claim. For instance, that economic growth could foster other markets apart from silver and gold ones, which might eventually make other investments more profitable.
Finally, a major flaw in the author's claim consists in the identification of investments in silver and gold with the best way to serve the firm's customers. The premise clearly mentions those metals as one of the most profitable investment strategies, while the conclusion states that investing in gold and silver - not taking into account any other precious metal - is definitely the best option to serve investors.
To conclude, the idea of increasing the investors' exposure to precious metals is not flawless, and additional evidence is required in order to assess this strategy. For example, data about profits from investing in precious metals in the past would be welcome, as well as an in-depth analysis of other options that might prove to be more profitable either on the long or on the short term.
The following appeared in a strategy memorandum of an investment company:
"Over the past several years, investment in precious metals, such as gold and silver, has proven to be one of the most profitable investment strategies for our firm. Over the next decade, the demand for these metals is expected to be strong, largely driven by the economic growth of large emerging markets--China, India, and Russia. Thus, our investors are best served by increasing their exposure to precious metals to take advantage of this unique profit-making opportunity."
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
RESPONSE:
The claim made by the author is about the importance of precious metals - mainly gold and silver - as an investment; given the high profits recorded over the past years by that firm, the author recommends increasing the exposure of their investors to the gold and silver market in order to increase profits due to a supposedly stronger demand, which should be due to the economic growth of some emerging markets. This plan presents several flaws, which are discussed below.
To start with, the author is not addressing why investing in precious metals is so profitable: is it because of a steadily increasing demand, or maybe because gold and silver natural reserves have been almost completely spoiled? What is more, nothing has been said about special circumstances that might have led to high profits.
Second, the author simply states that the demand for precious metals is expected to be strong, but no evidence has been included; therefore, it cannot be assessed whether this strong demand over the next 10 years may be sufficient to generate high profits. In addition, a correlation between economic growth of countries - such as China and India - and a strong demand for precious metals has been highlighted, but there is no evidence that supports this claim. For instance, that economic growth could foster other markets apart from silver and gold ones, which might eventually make other investments more profitable.
Finally, a major flaw in the author's claim consists in the identification of investments in silver and gold with the best way to serve the firm's customers. The premise clearly mentions those metals as one of the most profitable investment strategies, while the conclusion states that investing in gold and silver - not taking into account any other precious metal - is definitely the best option to serve investors.
To conclude, the idea of increasing the investors' exposure to precious metals is not flawless, and additional evidence is required in order to assess this strategy. For example, data about profits from investing in precious metals in the past would be welcome, as well as an in-depth analysis of other options that might prove to be more profitable either on the long or on the short term.
