Can Copper Be The New Gold ?
DRUM ROLL PLEASE...
No... copper is not the new gold, gold is gold and copper is copper. One look at the periodic table and it becomes very clear its two different elements with different, but similar industrial uses. But, lets explore the 3 reasons why we should not ignore copper. As of right now, 2021, gold and silver are being highlighted in the mainstream media. I likened this to a magician performing a trick they only show the hand they want you to see, while the trick is being performed on the other hand.
Allow me to let you in on a little secret, which I call the "Copper Rush" (F.Y.I. I googled copper rush and all I get is a quarter back from the Dallas Cowboys), yes, you heard right, the "Copper Rush".
To be clear, with this current state of affairs, I am long term bullish on all metals across the board, that includes Gold, Silver, Copper, Aluminum, etc. Reason is because the Federal Reserve can print more money, but can't print metals... (if you like to split hairs, which sometimes I technically do) ... it prints on metals, but metal is ore and mother nature has a systemic monopoly on such resources.
By the end of this, one will have 3 compelling reasons why copper is a stable investment and perhaps why you might want to look into such an assets to hold for the future. While copper might never have the same value, or come close to the value of gold (obviously) , some would argue that the percentage increase of copper compared to that of Gold will be higher in the near future.
In other words, pound for pound gold will always be worth more, but in the future the percentage of copper might be greater than that of gold, which makes for frugal investors like myself interested.
3 Reasons Copper is a Stable Investment:
1.Historic Value of Copper
2.Technological Revolution
3.Copper is Finite
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| source:thoughtco.com |
1. Historic Value of Copper
Lets take a look at copper from 1960 to 2020, we can see the chart below, clearly it is and has been on an uptrend, (like anything it cycles), and it looks like a healthy uptrend.
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| source:Macrotrends |
The Game of Averages
If I just had a time machine..., (if only, if only). well you know what they say: " buy low and sell high", or "buy and hold " or just have "really 'good{inside} information".
Lets break this chart down every decade starting at 1960 and finishing at 2020. Remember the goal is realize that copper has the historic proof that it is a stable investment and just by looking at picture above we can see, the statement holds true.
Lets take an overview of the average closing price of every decade since 1960 to 2020:
1960: $0.30
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| source:chemindigest.com |
1970: $0.62
1980: $0.98
1990: $1.15
2000: $0.84
2010: $3.44
2020: $2.80
source: Macrotrends
What would happen if we invest $100 dollars at the start of each decade and compare it to the end of the decade, in other words looking at each ten year period respectively ?
If we invest $100 in 1960 by 1970 we would have $206.67, increase percentage of 106.67% with a profit of $106.67.
If we invest $100 in 1970 by 1980 we would have $158.06, increase percentage of 58.06% with a profit of $58.06.
If we invest $100 in 1980 by 1990 we would have $117.35, increase percentage of 17.35% with a profit of $17.35.
If we invest $100 in 1990 by 2000 we would have $73.04, decrease percentage of 26.96% with a loss of $26.96.
If we invest $100 in 2000 by 2010 we would have $409.52, increase percentage of 309.52% with a profit of $309.52.
If we invest $100 in 2010 by 2020 we would have $81.40, decrease percentage of
18.6% with a loss of $18.60.
(That's 4/6 positive returns after each decade.)
What if we just invested $100 dollars and held form 1960 to 2020?
If we took $100 in 1960 by 2020 we would have $933.33, an increase percentage of 833.33% with a gain of $833.33.
But wait, there is more what about inflation or other comparable investments ?
According to the inflation calculator, (and some handy dandy grueling data entry) if we bought something for $100 in 1960, that same item bought for $100 would now cost $874.36 dollars to purchase in 2020 with a cumulative rate of inflation of 774.4% (purchasing power decreased).
Moreover, according to this compound interest calculator, (and more number crunching) investing in copper from 1960 to 2020 would be the same or almost the same ($1.51 difference, copper wining), as investing with an annual rate of return of 3.79% (compare that to 0.05% APY in today's standards).
The take away, investing in copper long term when comparing 1960 to 2020 not only beats the rate of inflation, but it holds its value through the years and its comparable to a 3.8% annual rate of return.
2. Technological Revolution
We are in 2021, with unprecedented circumstances, but regardless of that fact we are in a technological revolution, with AI, robotics, smart-grids, smart-cities, green-energy, emerging developing countries, technology isn't going anywhere anytime soon. The ingredients which compose those said components rely on copper.
For example; computers, phones, televisions, refrigerators, microwaves, electric vehicles, all of those components have some form of copper in them. Lets just focus on one variable, we can write about other variables in another post.
Lets look at the electrical automobile manufacturing industry. Before we do, keep one thing in mind "carbon emission tax". Regulations, regulations, regulations, that's right. In future you can bet electrical cars would basically be required, of course it will be a slow implementation. But, I can see it now, if you drive a 1970 Mustang while blurring Led-Zeppelin on the highway, you are an insensitive, self-fish, individual with no respect for the environment whom disturbs nature and therefore needs to pay an extra tax and or get rid of the gas chugging vehicle.
In other words, there will be a push for electrical vehicles on a global scale, and taking a look at the emerging countries like China, India, continents like Africa, and South America (that's a lot of people, like a lot), not to mention the already modern countries (more people into the equation).
Consumerism will come into play, with modern technology, as mentioned above.
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| source:wallpaperaccess |
"There are roughly 180 pounds of copper in every
electric vehicle. That’s 45,000 tons just for Tesla. Each year".
In other words, an intellectually lazy formula, but rough estimate ball park would be:
180lbs of Copper x (Demand of Automobile)
mind you, this is on a global scale, with rising regulations pushing for electric vehicles. One could always argue, in the future they will find innovative ways to reduce copper consumption in production, but it doesn't change the fact that copper will be a necessary component.
And this is just the electric manufacturing industry.
3.Copper is Finite
We can print more money, but can we print more copper ? (technically, yes, they "print copper coins") which proves my point, in 1982, the U.S. Mint went from producing copper pennies to producing zinc pennies. In other words, copper was worth more then the penny (value) it was in (go figure). I know some people are going to say certain things to argue that the supply of copper shouldn't be an issue because of things like: 40 year copper reverses, mining techniques, perhaps finding other exploration locations, short of finding that Mars has a massive amount of copper mines or a planet somewhere else. Technically, those are all valid reasons, and they should be weighed with integrity on an honest scale. Its something that is worth looking into.
But nonetheless, nothing last forever, according to Andrew Van Sickle in MoneyWeek ; copper might be a precious metal:
"Copper is becoming scarce. The yield of copper from
each unit of ore mined is dwindling. In 2010 the 15 top
producers' reserves boasted an average yield of 1.2%.
By the end of 2016, the figure had fallen to 0.72%.
Miners are therefore scrabbling to locate new supplies."
In other words, there is only so many apples on a tree.
So What to Do About It ?
At the writing of this article, 2/23/21, I don't have any affiliations or sponsors so the information presented above and below is not swayed by any external factors. If that were to change I would make sure to notify the audience.
I took it upon myself to go ahead and google, "best copper stocks". And compared the search results, to find the most popular/ recommended copper stocks from resources such as Monetly Fool, Yahoo Finance, AOL, Seeking Alpha, and Investmentu. The articles were written between 2019 and 2021.
The symbols of said stocks are below and as always more research is to be done.
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