He Sold His House for $500 Million
By Dr. Steve Sjuggerud, from Hong Kong
May 31, 2007

"Mr. Hong Kong" sold his house back in 1996 for more than HK$500 million, making it the world's most expensive house.

The house – called Genesis – was a ridiculous creation. But the fact that Mr. Hong Kong sold it with absolute perfect timing, for the equivalent of US$70 million more than 10 years ago, is even more ridiculous. The price was more than twice what anyone had ever sold a house for before in Hong Kong.

"Mr. Hong Kong" was Hong Kong's most renowned investor of the 1970s and early 1980s. He got rich in the stock market. And he got out when the time was right.

We can learn two important lessons from Mr. Hong Kong:

I've spent the last few days visiting with another well-known Hong Kong investor, Peter Churchouse. Peter shared the firsthand story of "Mr. Hong Kong" in the 1970s and '80s with me... and I thought it was so interesting, I had to share Peter's story with you.

Peter was invited to Mr. Hong Kong's house back in the mid-'90s. Mr. Hong Kong picked Peter's brain about stocks, while Peter gawked at his outrageous house.

"Even the architect that showed us around was embarrassed about how over-the-top this house was," Peter told me.

For example, Mr. Hong Kong had Milton Friedman's signature engraved in malachite on the wall... the signature was 40 feet long. I guess when you're building a more than 35,000-square-foot house, you can do things like that.

Peter told me this guy's history... He was successful at controlling the market in the 1970s. Once the market knew Mr. Hong Kong was buying or selling, it would reinforce the trend. His influence was that great.

Of course, as he got into the late 80's and 90's, he started to trade in other markets where he didn't have that kind of control. It hurt him...

Over dinner, Mr. Hong Kong asked Peter, "What markets are you looking at the moment? What do you think about Malaysia? I love Malaysia."

Mr. Hong Kong didn't know what he was doing there. Over the next six months, he lost millions in Malaysia.

Peter asked Mr. Hong Kong: "What are you going to do with this house – will you sell it?" The answer came back: "Oh, no, no, never – never sell this house – it's mine – I created it."

Peter told the guys in his office "I guarantee he sells it... And he's going to sell it before the handover of June '97 – he'll sell it to a Chinese buyer from China – and he'll sell it for north of five hundred million Hong Kong dollars."

Peter's prediction was right in all three aspects. Mr. Hong Kong got his money and then disappeared. And the house...

Well, this Chinese buyer borrowed up to the hilt to buy it. Then the market crashed. The banks ended up repossessing it and sold it for less than half of what the Chinese buyer paid for it. 

Mr. Hong Kong's timing was perfect. He saw the over-optimism in the markets, and sold. Just like he should have. Peter says he hasn't heard from Mr. Hong Kong since.

Except for getting his hat handed to him in Malaysia, Mr. Hong Kong was a super-successful trader.

The lessons from Mr. Hong Kong are, 1) you must stick with what you know, and 2) when everyone is wildly optimistic, it's time to get out.

The closer you stick to the rules, the more money you will make in the long run – I guarantee it!

Good investing,

Steve

P.S. Peter Churchouse has been in Hong Kong since 1980. He spent most of that time with Morgan Stanley, analyzing property stocks and heading up its Asian business. Now he manages a great-performing hedge fund specializing in Asian property. Visit www.limadvisors.com for more information.

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.

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