Things have been going well lately, and I now have a surplus of cash for the first time in a while. Err, rather, I have both a surplus of cash and some high consistency predictable future income. That's nice! I envy all you salaried people when I think about predictable future income. Having a decent chunk of cash, but no predictable future income means you don't really have a surplus of cash.
Anyways, I was thinking of what to invest a small bit of money in, and reading some papers and analyses and such. I'm reading a mix of finance, investment, politics, diplomacy, and history lately, which makes for a nice mix. It also has me interested in the topic.
Today, I read a really fantastically convincing argument, enough so that I was immediately ready to go buy a small amount of what the author was advocating.
Then I stopped myself! Wait, the author isn't necessarily correct - he's merely convincing.
I went back through the piece I was reading, which was quite a long piece. I started counting the number of premises the author had, and it went something like this:
If A, B, C, D, E, F, then G.
If G, H, I, J, K, then L.
Therefore, invest in L.
It was super convincing. But then it dawns on me, convincing doesn't mean correct. For instance, though the author doesn't explicitly state it, two of his premises are that the United States and Chinese economies, political leaderships, objectives, and currencies are going to be doing roughly similar things over the next 20 years to how they're doing now, maybe with a little bit of change but nothing drastic.
Perhaps that's not true! I don't know much about the current governmental leadership of China, who the next projected/potential leadership is, and their thoughts and objectives. Also, American economic, political, and monetary policy can change fast, and would it really surprise anyone if 2012 or 2016 brought in someone with significantly different monetary views than recently?
So, two of the author's biggest unstated premises are that China and America will behave roughly how we expect China and America to behave over the next 20 years. And if he's wrong, the entire analysis might fall apart.
It was a super convincing argument, but there's a problem with any argument that has a lot of premises chained together - if even one premise is wrong, then the whole conclusion might be faulty.
Convincing doesn't mean correct - it just means convincing. Stay skeptical. Keep researching.