The real estate world has been living off the easy money of low interest rates for the past decade and the industry has been blithely taking advantage while it can, knowing the time had to come when rates would turn higher. Until 2008, low rates had juiced returns into a literal oblivion. Post-crash near-zero rates enabled many underwater borrowers from being toasted and banks sidestepped recognizing all their bad loans until markets slowly resuscitated—they avoided Armageddon. Of course, low interest rates have floated the moribund housing market since the crash and enabled the start of recovery. And for investors and developers who could get loans, the low rate environment has been a recent boon.

Given that low interest rates have been a necessary medicine to revive a damaged economy and crippled financial system, you might think that taking markets off treatment might be viewed as good news—recovery is taking hold and may be businesses can start to thrive on their own without such levels of stimulus. Hey, let's start investing more.

But then the schizoid Fed tries to have it all ways in its delicate dance—easing up ever so slightly on the bond buying, staying the course for low rates until the end of next year, and pointing out nervously the still high unemployment rate. They want to cheerlead and show greater confidence in the economy, but not get too unrealistic about the real state of affairs—the economy and financial system may be out of danger, but we are not positioned for any boom.

As a result, smart investors must reflect the U.S. economy is lackluster at best after all the Fed's considerable attentions over nearly half a decade and the markets signal their ongoing lack of confidence about standing on their own.

Then you look at what is going on in China and Brazil—once the BRIC poster children for global economic expansion. The opaque Chinese system appears loaded down with bad loans increasingly hard to obscure, while Brazil suffers through riots and social turmoil as growth rates hit the skids since China isn't buying as much of their commodities.

The downside risk for investors no longer seems to emanate from the U.S. and Europe may save itself by easing up on austerity. But China looks like the real trouble spot—they have overleveraged while raising expectations about higher living standards in their vast population, which lives in some of the world's worst pollution and has begun to age rapidly.

The worm turning in China may be the antidote to higher interest rates. Let's hope not.