Risks on various fronts...

From inflation fears triggered by a surge in commodity prices to growing tensions in the middle east to more downgrades in peripheral Euro zone sovereign debt, it is challenging to figure out where or in what form one can find shelter from the damaging effect of a sudden "fat tail" event. This challenge stems from the fact that the last couple of years have shown us that what used to be considered "safe" may no longer be. If you cannot differentiate between high risk and low risk, you are in trouble.
The Euro zone debt debacle is a case in point with the onetime almost "risk free" sovereign debt of a number of member states suddenly finding themselves in "junk bond status" territory. Another example would be the infamous money market funds that at one time was considered as safe as cash but in fact carried an disproportionate amount of risk as managers, under pressure to enhance returns, stuffed the funds with significantly higher risk instruments.
What about commodities such as gold which has experienced a nice run since the beginning of February? Sure, when visibility is low and the threat of systemic risk rears its ugly head, gold seems to be a safe bet. It is in a way the collective expression of distrust towards monetary authorities across the globe. At the same time, gold, just like other commodities, exhibit a tremendous amount of volatility as it is very much guided by sentiment which tends to be fickle when tensions run high.
At the end of the day, the only effective method in facing these challenges is to diversify. Not just any sort of diversification mind you, but one that involves a well thought out approach where the underlying risks are clearly identified.