Making Money Before Housing Crumbles

But like Greenspan's unwillingness to raise margin rates in 1999, I expect him to do nothing until the market declines. Then, the taxpayers will be on the hook for the stupidities of the real estate speculators. Remember, I expect a sequel to RTC in the future.

How does this outlook impact my investment process these days? Like Doug, I believe that the real economy is at risk to a property collapse. But I cannot invest as if the world will end tomorrow. I could be wrong about real estate; the economy may handle a real estate bear market better than I expect. The bull market in property may persist for another few years.

People who compare this situation to the tech bubble are silly. Many tech stocks traded for 10 times what they were worth as businesses. Few think real estate is anywhere near that overvalued.

I still own some homebuilders, but they are up a ton and I have "rung the register" on the way up. I own many economically sensitive stocks; they too are down big and cheap -- just like the homebuilders of last year.

If the economy muddles through, I expect to make a lot of money in these stocks. If the world ends, I will have to invest more defensively. I pay a lot of attention to the macro data. But, I would feel much better if the Fed took some steps to temper the enthusiasm in the real estate markets. We don't need to deal with the aftermath of another Fed-induced bubble.

RealMoney subscribers can click here to read Doug Kass' bearish outlook on housing.