Montreal, Canada

Whatever yesterday was for investors it wasn't the Big One. Greek debt fears and an electronic trading glitch in New York knocked stocks down almost 1,000 points late in the afternoon shaking investors worldwide.

In the end, it looks like this might be a correction and nothing else. But it does serve to remind investors that the post-March 2009 low is looking vulnerable and that the "easy money" has already been made.

Investors want to see cash heading into Greek coffers – and fast. Germany's lower house passed a bill to fork over $29 billion dollars to Greece. The Germans have been reluctant to commit to a Greek bailout and rightfully so. Yet a Greek default would be quite painful for Germany's banks – the biggest lenders to Greece. The French and Italians also have big stakes.

In this environment of heightened risk aversion it certainly makes good sense to have gold. Prices surged on Thursday. Gold is outside of the credit system – unlike paper money and bonds – and harbors no liability. It's debt-free and liquid.

At this point, it's quite obvious that the global exchange rate system is dysfunctional, major government bond markets are in a state of flux and stocks hostage to events affecting credit.

As for bonds, they still belong in a diversified portfolio. Aside from gold, bonds of the highest quality posted positive returns on Thursday. But "which" bonds should you own? There's a ping-pong match going on whereby investors are jockeying between sovereign markets trying to park cash in a world that's growing increasingly jittery about government deficits.

The only government bonds I'd hold now are U.S. Treasury's and German bunds.

However, a mixture of high quality paper should also include some emerging market debt, corporate bonds and TIPS. Most of these securities gained in value in yesterday's panic. Remember to keep your effective duration short.

Alternatively, Bill Gross has a handle on how to run a fixed-income portfolio in the age of violent capital markets and rising government debt contagion.

I like the PIMCO Total Return Fund – still beating the markets over the last decade and with far less risk to capital than common stocks. Gross is up 4.2% this year compared to 1.8% for the S&P 500 Index. His effective portfolio duration has shrunk markedly over the last several months and should be a staple in all long-term portfolios, especially those at, or approaching, retirement.