It is a very valid comparison. See, CDO Hedge Funds = Enron?

But, what does it mean to the larger market and especially to small to medium real estate investors?

It depends.

If you are using these hedge funds as part of your investing strategy, you probably have a lot to worry about.

If you are heavily leveraged in your real estate holdings and were counting on an easy refinance this year or next, you really have something to worry about.

If your holdings are not heavily leveraged and you have ample room for a price correction and are looking for the long term results from your investing strategy, you probably sleep very well at night and have little to worry about.

If you have stockpiled a little cash you are likely to see some really great opportunities present themselves as lenders are forced to tighten their positions and borrowers are forced to sell, walk away or hang on by their fingernails until they are foreclosed on by the lenders.

Now is not the time to be entering the stock or bond market. It may be the time to reduce your position in those. Now may be the time to selectively buy real estate if you get the right deal.

It is never wise to try to time any equity market and you need to buy today based on the lower value the property will have one to two years from now.

Housing appreciation will revert to the historical mean. In some areas it will happen in one year and will cause a real and significant loss in value in that time. In other areas it will take longer by not appreciating at all over the next five years.

If you buy today based on unreasonable expectations of appreciation, you are definitely going to lose money.

Oh, about the hedge funds and Enron comparison? Where on earth do you think Enron got its model? Enron was little more than a hedge fund on steroids. Hedge funds are not operating any differently now than they have been in the past.

And much like in the past, many of these hedge funds are about to face a margin call. That will force them to sell assets and will begin to accelerate the affect these non-performing sub prime loans will have on the larger market.