The Real Risk: Repricing of Real Estate

I've been very cautious and even, at times, bearish for most of the last couple months. After some of the feedback I've received, I want to be clear that I'm certainly not turning into my favorite teasing target -- a permabear.

But longtime readers know that I want to respect the economic and market cycles. And I am not at all comfortable being out-and-out bullish right now. Sure, I think we are likely to head into the "echo techo bubble." But I just haven't thought that the stability and steadiness of this five-year bull market was sustainable when people like Sumner Redstone say there's more capital than they know what to do with out there, and when private-equity groups are selling stakes in their own companies to the public.

And frankly, even as I think you can trade this market for the next few weeks by buying extreme weakness and selling extreme rallies, I think there's too much risk for sudden extreme weakness and downside dislocations in the market for me to be anything but extremely cautious myself.

See, I'm seeing it as though the permabears finally have some real catalysts to take down this still-ongoing, wondrously steady economic boom we've been living through for the last half-decade. Would it surprise you at all if I told you that I think they're missing the entire dynamic that's going to cause their long-promised -- and long-wrong -- downturn? (Click here for more of my rantings on the permabear culture.)

The fact is that I don't really understand why I'm supposed to be freaking out about the permabears' No. 1 quoted reason for "the coming collapse": the hundreds of billions of dollars in variable-rate mortgages that are going to be reset at (probably) higher rates in the next few years. I agree that rates are much more likely to trend higher in the near-term, as the quarter-century-long decline in interest rates reverses to go higher again. I explained that in detail in the Financial Times a few weeks ago, as well as here on RealMoney.

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Cody Willard is the manager of CL Willard Capital Management, LLC. He is a regular guest on Fox News, CNBC and other networks, and he writes a monthly column for the Financial Times. He is also an adjunct professor at Seton Hall University and the author of TheCodyReport.net, a monthly stock market newsletter. Willard appreciates your feedback -- click here to send him an email.