Many are waiting for the "bond bubble" to burst, at long last, from the quantitative easing policies of the Federal Reserve under Chairman Ben Bernanke.  An article in The Wall Street Journal by David Wiessel and Victoria McGrane,the bond bubble "Swoon in Bonds Puts Eye on Fed," stated that, "The bond market's month long plunge has pushed long term interest rates on mortgages and U.S.

Treasuries to their highest level in more than a year, sparking a debate over whether this is a bursting bubble, the aftermath of clumsy Federal Reserve communication or a welcome sign that the U.S. economy is, at last, on the mend."

Eventually the Treasury bond bubble will pop, in one form or another, due to the policies of the Federal Reserve and interest rates will rise.

Committed to maintaining a low interest rate environment by Chairman Bernanke, the Federal Reserve has expanded its asset sheet through an accounting mechanism to acquire trillions in Treasury bonds and mortgage-backed securities in an effort to re-capitalize the financial systems around the world, both for the public and private sectors.  As of result of creating trillions in new currencies without the corresponding economic growth, it is believed that a "bond bubble" has been formed with Treasuries that will eventually explode, resulting in higher interest rates.  The asset sheet of the Federal Reserve had about $700 billion in securities in 2007.  Now there is over $3.3 trillion, which is increasing at the rate of $85 billion each month due to Quantitative Easing III, Bernanke's program to finance the US budget deficit with the securities buys by the Federal Reserve.  Eventually equilibrium will have to be restored in the global capital markets.

When that happens, those investing in real estate through the financing of private mortgage notes will prosper.

"The main reason that private mortgage note backers will benefit is that interest rates will rise.  That will increase the yield for private mortgage notes.  At present, we have a documented investment return of 12% for private mortgage notes.  When the Treasury bubble bursts, that rate of return should increase," remarked Shaun Cohen, President of Equity Finance, the funding unit of EquityBuild, a real estate investment firm.

Cohen continued, "Another reason this will be positive is that traditional lenders such as banks, credit unions, and mortgage brokers will most likely pull back operations.  It already is much harder to get a mortgage, particularly for an investment property.  That will make it much more difficult to obtain a mortgage.  As a result, the numbers of those looking for a private mortgage will increase.  That will result in higher profits for the providers of private mortgage notes."

"What should increase the profits even more from private mortgage note investing," Cohen furthered, "is the flexibility in the deals.  The terms are completely open, which allows for the lender to structure the mortgage to best meet their needs.  If one of the goals of the private mortgage note provider is to reduce their tax burden, then the private mortgage note can be held in a retirement account.  From here, the income received and any profits from buying and selling private mortgage notes will be tax free."

There could also be a flight to quality away from Treasury bonds after the bubble bursts, and panic sets into the market.  Realizing that a new era has arrived in the bond market, investors could seek the safety of financing mortgages for individual properties or join others in a pool.  "Financing a single transaction with a private mortgage note is best left to the experienced," Cohen counseled.  "But there is no reason why those new to providing private mortgage notes cannot participate in a consortium with other investors to spread the risk and share the profits."