David Dreman just wrote on Forbes about risk.  He had some interesting thoughts on private equity (pay careful attention to what he said about Samuel Zell):

There are pockets of risk you should definitely avoid. Two of the most dangerous are private equity and hedge funds. Despite their salesmen's smooth PowerPoint presentations, many of these creatures have no clear-cut strategies of where to place the huge dollar flows they are receiving. They charge large fees for the privilege of accepting your money and often lock investors in for two to three years. If something goes wrong, then you have no way out.

Private equity works best when it finds very cheap companies--hard to do with so much competition from scores of other such funds. And then they must enlist operating geniuses who can dramatically improve company earnings where previous management failed. Next, they ladle on more risk by increasing the target company's debt in the hope that earnings will balloon in the next few years. A heck of a tall order.

Even the better-known funds like Blackstone Group are taking on immense new risk. Blackstone recently purchased Samuel Zell's Equity Office Properties Trust  (nyse: EOP -  news  -  people ) for $39 billion (including debt). Zell is regarded as one of the shrewdest operators in the real estate world. When Zell sells, it's like a bell tolling for private equity's peak. Good luck to Blackstone investors.

Hedge funds, on the faster track of daily trading, already have shown how things can come apart. Amaranth, a hedge fund with a sizzling record for some years, lost $6.6 billion in the fall and collapsed. The fund allowed a young trader to make enormous directional bets in natural gas futures. This was the largest hedge fund failure since Long-Term Capital Management in 1998.

Dreman also goes on to talk about subprime mortgage companies and other market risks.  For example, two big indicators are:  1) the low spreads between the S&P earnings yield and the ten-year Treasury bond yield and 2) low spread between junk bonds and Treasurys.

Although Dreman said it a little differently, every expert thinks all markets are pretty much tapped out.  Yet, judging by the quick market recovery and low volatility, most people are not concerned.  I feel I should have more cash on hand.