Oil, iron ore, and copper have slipped again overnight, tipping salt in the wounds of investors who have already suffered 50%, 46% and 18% declines in the past year.
Crude oil dropped another 5.6% to US$47.24 for Brent and $45.71 for West Texas Intermediate, while iron ore fell 1.5% to US$69.58 and copper declined 1% to US$2.75.
Precious metals however edged higher with gold, platinum, and silver all putting on 1% overnight.
Just the other day I wrote an article about gold's remarkable turnaround, from wooden spoon to the third best commodity of 2014.
If you look at the chart in that article, you can see just how rapidly things have changed in the five days since it was published.
What's starting to concern me – more than the drops in my oil producer Senex Energy Ltd (ASX: SXY) or my iron ore miner Rio Tinto Limited (ASX: RIO) is that falls in the wider commodity market could drag aluminium down with it.
Considering I have reasonably sized stakes in junior bauxite (a seed ingredient for aluminium) producers Australian Bauxite Ltd (ASX: ABX) and Queensland Bauxite Ltd (ASX: QBX), it's easy to see how declining aluminium prices could splatter my portfolio in red.
Be that as it may, I'm confident in my purchases and will continue to hold them until my investing thesis changes.
But as a smart investor, I'm also planning contingencies, and right now the best contingency for me is to invest in growing companies with strong cash flows and pricing power (i.e., not commodities).
Sooner or later commodity investors are going to catch on that opportunities in the sector are incredibly limited, and start looking for other places to put their money – and where better than in companies with strong cash earnings, and growing dividends?
Woodside Petroleum Limited (ASX: WPL) investors are facing a cut in their juicy 6.6% dividend and with another drop in interest rates on the cards, a lot of market participants are going to be looking for ways to rejuvenate their portfolio.
I'm determined to get to the good opportunities first, and top of my list is The Motley Fool's Top Stock for 2015.
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