Please review my first AWA

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.


Finished with approximately 5-6 minutes left; re-read and submitted by 2:30 minutes left

While the author, an investment company in this case, makes a reasonable assumption, the company's argument is flawed. Over the next three paragraphs I will explain information that the company is missing in their memorandum which could potentially prove or disprove their assumption.

First, while the company points out that it has profited from its precious metals investments in the past and that it expects demand for precious metals to be strong in the future, it fails to note whether or not the market has already reacted to such news. If strong demand is expected by the market then prices in the precious metals industry already reflect such an expectation. Therefore, profits based on such news are largely eroded. If the author had addressed this point by, for example, stating its strong demand expectation conflicts directly with the rest of the market, then the assumption would have been better supported.

In addition, the memorandum states that precious metals investments have been profitable for the firm, but no where does it state that precious metals investments have also been profitable for the firm's investors. The firm itself may have profited as a result of economies of scale, meaning that it was able gain a certain level of exposure to the precious metals industry, giving it a unique ability to profit. Unlike the firm, investors may not have adequate levels of capital to be able to achieve such levels of exposure, and thus profit opportunities are not as advantageous for the investor as they are for the firm.

Finally, the firm fails to specify which precious metals investments are expected to yield profits. While the firm lists gold and silver as examples, there could exist a precious metal that becomes unprofitable as a result of economic growth in the large emerging markets. Therefore, a blanket statement advocating for investment in precious metals, without also a statement pointing to expected profits in every single precious metal, could lead to an investor gaining exposure to an unprofitable metal.

While the author makes a plausible argument, the flaws discussed above, if addressed, would lend better support to his conclusion.