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November 8, 2002     Cape Gazette
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November 8, 2002

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CAPE  Friday, Nov. 8. Nov. 14, . 87 BUS:t]yESS & REAL ESTATE The south went and did it again Sussex cleans By Amy Reardon Sussex County swept the Gov- ernor's Tourism Awards again this year. Six of the eight organiza- tions honored by Gov. Ruth Ann Minner, Oct. 30, were from south- ern Delaware. The awards dinner ended the daylong Governor's Tourism Conference held at theDover Downs Hotel and Conference Center, which opened last March. The Delaware Tourism Office advertises Delaware as a "drive- to" destination. Tourism initia- tives, therefore, that keep cus- tomers in the area overnight are crucial to the industry. Delaware's Tourism office aims to attract high-value customers who will stay overnight, during peak and shoulder seasons. The Governor's Tourism Awards, therefore, honor individ- uals and organizations that make significant contributions to the in- dustry in these areas. "Tonight's winners are an out- standing example of the innova- up at tourism awards dinner tion and hard work that make tourism such a vital component of our state economy," said Minner. Tourism award nominations are judged against the individual cri- teria for each category. Multiple organizations, therefore, can win an award if they qualify. Travel and Tourism Person of the Year, the annual event's Hail of Fame Award, and Best Time- Targeted Campaign are the three most prestigious aards of the ceremony. Fay Jacobs took home the Trav- el and Tourism Person of the Year Award for her work with Re- hoboth Beach Main Street. The award honors the strong leader- ship, service, and creativity of an individual in the industry. Jacobs, since becoming executive director in 1999, has tripled the member- ship in the program and promoted events that increase overnight stays. She partnered with the Friends of the Rehoboth Beach Public Li- brary to produce Rehoboth's An- I nual Chocolate festival, which doubled the event's income and attendance. She also came up with the Dolphin Project, a spring 2003 event, that will feature 20 six-foot dolphin sculptures artisti- cally decorated and placed throughout downtown Rehoboth. The Bethany Fenwick Area Chamber of Commmerce won the annual event Hall of Fame Award for its Fall Surf-Fishing Tourna- ment, which attracted 550 partici- pants in 2001, mostly out-of- towners. The award is given to festivals or events, 10 years or older, that show a steady increase of attendance. The fall fishing tournament was designed to attract tourists to the beach resort during the off season in 1978. Approximately 70 per- cent of participants, who have fished in more than one tourna- ment since 1998, live more than 50 miles away. Southern Delaware tourism and partners for Discover the Trea- sures So Close to Home won the Amy Reardon photo Fay Jacobs is presented the award for the Travel and Tourism Person of the Year at the Governor's Award dinner Oct. 30. Shown are (I-r) Janet Wurtzel, director of Delaware Tourism Office; Gov. Ruth Ann Minner;, Jacobs, executive di- rector of Rehoboth Main Street; and Judy McKinney-Cherry, director of the Delaware Economic Development Office. Jacobs also accepted the Best Partnership award on behalf of Rehoboth Main Street and Rehobeth Art League. Best Time-Targeted Campaign Award. The award honors an or- ganization for successfully imple- menting a marketing effort to in- crease visitation during a specific time period. Southern Delaware Tourism created Discover the Treasures So Close to Home to boost visitation to Southern Delaware during the 2001 shoul- der season but extended the pro- Continued on' page 68 I Be prepan:d: bubble is about to burst in bond market During the past few months, we have read and heard a lot about the stock market bubble. The Monday morning :quarterbacks have criticized the Federal Re- serve for not having taken previ- ous action to prevent the bubble from occurring. These are proba- bly the same individuals who also faulted Alan Greenspan for his now-famous quote of "irrational exuberance." When the Fed chairman made that remark back in the late 1990s, I remember the investment com- munity chiding Mr. Greeuspan for trying to influence the stock mar- ket. They said it wasn't his job to worry about the fate of the market but to maintain the value of the dollar. Seems to me the current critics are trying to make Mr. Greenspan the scapegoat rather than placing the blame squarely on themselves. After all, everyone knew the mar- ket was overvalued, but greed keeps us all in the game. Now there is another bubble about to burst and no one seems to be discussing it. But if history re- peats itself, I am positive that in the next several months or years, the investment community will once again be blaming someone other than themselves for the de- cline in bond asset values. The bond market rally is in its final stages and when the bubble FINANCIAL FOCUS pops, individualsholding individ- ual bonds and bond mutual funds will surely feel the brunt of the collapse. When interest rates rise, in- vestors with bond portfolios will see their assets plummet, Since higher interest rates have an in- verse effect on the market value of fixed income investments. In oth- er words, as interest rates rise, the market value of a bond or bond fund will fail. And bonds are the only investment class that acts in- versely to interest rates. The market value of noncon- vertible preferred stock would be hit with an increase in rates, and depending on the earning power of the underlying companies, stocks of utilities and REITs would also be influenced in a neg- ative way. Interest rates for the most part have been steadily falling since the early 80s. Back then, one could easily invest in a 30-year Treasury bond and receive 15 per- cent on their monies and as rates declined, the value of the bonds appreciated. In other words, the bonds could have been sold and maybe still can be sold at a premi- um prior to maturity. Currently, 30-year Treasury bonds only yield approximately 5 percent and if rates begin to rise with the economy recovery, the market value of the bond will di- minish if sold prior to maturity. Thirty years is a long time to be stuck with a 5 percent return. Just how far will the market val- ue of a bond fall in a rising inter- est rate environment7 The best way to answer that question is to let you come to your own conclu- sion. For example, let's assume today yo u purchased a $10,000 30-year Treasury bond with a 5 percent yield. That bond would pay you $500 in interest per year in in- come. If interest rates were to climb to 10 percent, how much would you be willing to pay for the same bond you currently own? Well, if it's paying $500 per year and you can currently get a 10 percent return on a new bond, you i i I I  "i i l i probably wouldn't want to pay much more than $5,000 if you still had 30 years to go on the bond, because now 10 percent yield on a $5,000 bond would give you the same $500 in income you origi- nally had to pay $10,000 for. So in theory, your original bond now only has a $5,000 market value. Now rates aren't going to jump 100 percent in one year, but say in 10 years they did. Your original bond might only be worth $7,000 or so. The point is, investors are going to witness depreciation in their bond portfolios if interest rates rise. Keep in mind ff one Chooses to hold their individual bonds to ma- turity they will receive the face value of tbe bond. But if interest rates increase over the duration of the bond, then the holders are stuck with a substandard rate of return. In the case of a bond mutu- al fund, the results are even worse, because a bond fund doesn' have a fixed maturity date. So if you feel interest rams have bottomed, but you still need some fixed income in your portfolio, then you need to review some al- ternatives that can offer you in- come without automatically los- ing asset value during times of ris- ing interest rates. You might have to suffer some loss of yield, but you can protect your principal, which in most cases is paramount, to the income investor. Money markets, CDs, fixed annuities and treasury inflation protected secu- rities, are a few investments you might want to investigate. If you feel the stock market is on the re- bound, then search out convertible bonds and convertible preferred stocks of gold solid blue chip companies. Are these investments fool- proof?. Absolutely not! But history is on their side. With proper plan- ning and selection, you can cer- tainly hedge your fixed income portfolio against a bond market bubble. A qualified financial ad- viser can certainly educate you about the pluses and minuses of these alternative investments. Bottom line - most Of us just got clobbered by the stock market bubble - don't let the bond market do the same thing to you. Visual- ize the effects of a bond market bubble and prepare for it prior to the implosion. Don't be like the critics of today who look back and blame someone else. Be proactive and take control of your destiny and place greed aside. Make the necessary changes to protect your assets. Remember the situation is always the boss. Do what the situ- ation dictates. - Editor's note: David R. Clogg is a financial adviser at Cliapin, Davis of Baltimore. For more in- formation, call 410-435-3200.