How to Play a Downturn: Lesson from an Aussie Billionaire

The best thing about Hamilton Island is that it’s a real-life example of how to make extreme wealth in an economic downturn, especially a deflationary one like what I see just ahead.

My wife and I spent four days at the world class Qualia hotel on Hamilton Island before I started an intense media and speaking tour in Australia last month.

When planning the trip, I instantly picked this hotel because it had been featured as number one in the world a few years ago in Travel and Leisure magazine.

I’d been to the Great Barrier Reef twice in the early 1990s… and to Hamilton Island, which was most famous for George Harrison’s house back then.

But the island was even nicer this time around.

I’ve never seen an island where everything — the architecture, the landscaping, the harbor, the shops, the restaurants, the hotels — were so uniformly classy. There was only one old, large hotel, called the Reef View Resort.

Hamilton Island was originally planned as a major grazing project in the mid-1970s. But in the early ’80s it was turned into a resort destination, with a commercial airport, a harbor, and a resort.

Robert Oatley, who has won some prestigious ocean races, was sailing in his yacht passed the island at the turn of the century when he became impressed with the project underway.

The island was prospering when I was there in the early 1990s, but in the global recession and stock crash of 2000 to 2002, it fell into bankruptcy and the bank took back ownership.

So, in 2003, Robert Oatley bought the whole island for $150 million. In the grand scheme of things, that’s small change. Even the island’s airport was worth more than that!

But Oatley had the cash, and he knew how to play a downturn…

He put Australia on the map for world class wines, with his winery, Rosemount, the largest one in the country. He then sold that for an enormous sum. So when the Hamilton Island deal popped up, Oatley had the cash to snatch it up.

I imagine he was able to buy Hamilton Island for close to 10 cents on the dollar.

This island must now be worth $2 billion or $3 billion, at the very least.

Hamilton added a new gorgeous marina complex, hotels, shops, and very nice residential developments.

He owns the Qualia hotel, considered one of the top in the world.

He features his new winery, Robert Oatley, in all the restaurants, hotels, and stores.

He even has a hospitality school in the harbor town; what better an institution for this tourist-intensive part of Australia.

Oatley is a classic, Branson-like entrepreneur.

He started with a coffee and cocoa business in Papua New Guinea.

He was awarded the British Empire Medal by Queen Elizabeth for his contribution to the country’s economy.

Then he brought Australian wine to the world and made Shiraz famous with Rosemount.

He has cattle ranches… and now one of the top resort islands in the world.

He, like Branson, violates that old rule of sticking to your knitting. But most of all, he has the guts and the cash to jump into a bargain like Hamilton Island when he sees one.

I’ll say it again: That’s how you make extreme wealth in an economic downturn.

I’m not suggesting you rush out and buy an island. Nor am I implying that you need to have millions of dollars at your disposal.

What I am saying is that cash (and cash flow) is king… guts (and instinct) is queen… and information (like what we bring you at Dent Research) is invaluable.

Harry

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About Author

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.