Private Investor: Copper's rise means I could be coining it in

How did it come to this? Despite this week's copper price setbacks, my small change - and yours - is now more valuable as scrap than as currency. According to the reports I've read, a penny is worth one-and-a-half pence and a 2p piece is worth 3p if it were to be melted down.

I've got jam jars and piggy banks full of these coins which I always promised myself I'd deposit in my building society account, until I noticed a sign that said they wouldn't take more than £10 in change in one go. When it's that difficult for us to put money away, it's no wonder the savings ratio has collapsed.

Anyway, maybe I should be taking my old coins somewhere to be melted down instead. Not all of the coins, mind you. Only those struck before 1992, and some from 1998, have the necessary high copper content to be worth more than their face value. The newer coins are made from steel, so it's easy to sort them out using a magnet.

I ought to point out as well that it is illegal to muck about with coins of the realm and, despite some enterprising journalist hopping over to France to do the deed, I wonder how many one would need to melt down before it's worth one's while - making due allowance for travel and fuel costs and one's valuable time. Besides, I have a certain sentimentality about old coins, and wish we still had big, round old pennies and twelve-sided threepenny bits to spend. Both have long since been victims of inflation and decimalisation, I'm afraid.

That's enough nostalgia The point about my pennies is that it goes to show what's happened to the copper price. It's risen by such an enormous amount in the past year or so and it's speculative. Maybe the market ructions this week are a harbinger of even bigger shake-ups to follow.

In any case, the rise in commodity prices is about more than the growth in demand from China and other "advanced, emerging" markets such as India and Brazil. There does seem to be have been something of the bubble about it.

Apart from the cash I keep in old jam jars, the only exposure I have to copper is my few shares in Rio Tinto. I bought them about nine years ago for less than £7 a share and they've hit over £32 in their recent peaks. Now, I could just take the profit. Nothing wrong in doing that and it would satisfy a lot of market wisdom. However, I'm still inclined to hang on to the shares because I just can't be sure that my suspicions about the copper price are, well, copper-bottomed.

Even if the copper boom is a speculative bubble, the increase in the price might not be all speculative; there is an increased real demand for the metal, although it has to be admitted that a commodity price/US dollar collapse would leave the real Chinese economy looking a bit shaky too.

So why stay invested in Rio Tinto? Just because, as I say, I might easily be wrong and it is the only exposure I've got to this suddenly important part of the stock market. If it goes now, how would I get it back? I know that's a bit of an investment fallacy but, more broadly speaking, surely it's a good idea to maintain the balance of a portfolio, even if parts look absurdly overvalued.

Maybe it's also good to have bits of the portfolio looking absurdly undervalued. Vodafone was one of the very few FTSE 100 stocks going up at the beginning of the week, though modestly. For all its recent travails, it seems to still serve a purpose as a safe haven in a storm. So mobile telephony, or at least Vodafone, has gone from nothing to meteoric growth star to undervalued, stodgy utility in two decades flat.

Even the recent rumours about a successful sale of its stake in its joint venture with Verizon don't seem to have moved the share price much. The broker UBS has raised its "target price" on Vodafone from 145p to 153p (its been stuck at 120p to 130p for ages). I'd be happy with that.

s.ogrady@independent.co.uk

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