Global markets were remarkably resilient in the wake of Dubai s startling Thanksgiving eve announcement that its big state-owned investment vehicle was postponing interest payments on a chunk of its $59 billion of debt. Can investors breathe a sigh of relief?

Dubai World s debt crisis is a stark reminder that reckless lending wasn t confined to U.S. subprime borrowers. With benefit of hindsight, it s hard to imagine more poorly timed and overpriced investments than some of Dubai World s: Luxury retailer Barneys New York and a stake in troubled Las Vegas mega development CityCenter, neither of which is even part of the proposed debt restructuring.

What were Dubai World s lenders thinking? Evidently that oil-rich sister emirate Abu Dhabi would come through in a crisis, which didn t happen. Dubai World s debt was not backed by the United Arab Emirates, and evidently Dubai World is not too big to fail.

Moral hazard the risk of loss is suddenly back in emerging markets. I could argue that Dubai World, with its profligate borrowing, bad timing and extravagant ambitions, is uniquely at risk of default. That may be why world markets, after initial jitters, reacted calmly, and many bounced back early this week. But can we be sure that Dubai is really such an extreme or isolated example, given lending standards around the world during the easy-credit years that led to the financial crisis?

Lately investors have been pouring money into some of the riskiest fixed-income categories. Junk bonds have been having their best year ever, up an average 42.5% this year, according to Morningstar. Emerging-market debt funds have notched similar returns. The Fidelity New Markets Income Fund was up 44.4% year to date, even after the Dubai news. Commercial real-estate investment trusts have surged, despite growing fears of commercial real-estate defaults. Fixed-income investors chafing at the miniscule rates on safe certificates of deposit and Treasury bills have been chasing yield, seemingly without much regard for the risk of default.

For stocks, I have the Common Sense system for buying and selling. I don t have a similar system for bonds or fixed-income funds. Given their relatively low volatility compared to stocks, I don t see much point. Generally, I m a buy-and-hold, conservative bond investor, saving my more aggressive strategies for stocks. But if I did have such a system, I d surely be a seller at this point.

I see a potential bubble in high-risk fixed-income investments. At the very least, abnormally high returns in the 40% to 50% range can t continue. And at worst, a cascade of defaults among high-risk borrowers could cause serious losses to principal as risk is repriced into these investments.

In the current low interest-rate environment, I don t have many fixed-income investments. The only high-yield fund I own (and have recommended) is a Pimco closed-end fund, the Income (PKO). It s a global bond fund, and one of the rare Pimco closed-end funds that trades at just a modest premium to its net asset value. I checked its most recent portfolio holdings and was relieved to find nothing connected to Dubai. Indeed, I was surprised that nearly all its top holdings were U.S.-based. Still, like other high-yielding fixed-income funds, it s been on a tear this year, up nearly 40%.

A year ago, with spreads between Treasurys and high-yield bonds at historic highs, these investments made sense, even with a relatively high risk of default. But those spreads have vanished. In my view, Dubai World s crisis is a timely reminder to take some profits. The same could be said for emerging markets across the board. With markets still near highs for the year, it s a good time to rebalance.