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Wouldn't you have paid tax on that money in the year it was earned? You also "pay" inflation on your money if it's sitting in the bank.
I certainly think there's a time and place for both your money and OPM. The more risk the more i'd want to be using OPM.
Money isn't owned until it's tax free, already taxed. Owned money can be stored in appreciating assets so inflation strategies are the responsibility of the person that owns the money.

Borrowing money to invest is just piling risk on top of risk. Using your own money all you are risking is the market changes. Borrowed money is always attached to owned assets... which means they are no longer owned.
 
Using credit and borrowed money is just a tool. And like any other tool if used incorrectly it will get you into trouble. I would never borrow 100% on cattle. I know people who have done that. And they made good money but eventually it came back to bite them in the rear. If I were borrowing more than I can afford to lose I would darn sure budget in LRP.
 
You don' have to get a corporate loan from a bank, credit union, etc, either. YOU can loan it to a company as well. Scott and I have an S-corp that owns the Kud-zu Corr land. S & W Ent., INC. When we bought the last herd of Corrs for $25k, S& W bought them. Had we just deposited $12.5 k each into the S& W account that is income to S &W and we will get taxed (pass through, so capital gains, not income). Instead, each of us loaned S & W $12.5k, at 5%, I think. There is a minimum interest way you have to pay yourself when you loan your company your personal money, but I forget what it is. Probably 5%. The interest it pays us is tax deductible to the corporation, so that off sets what little income from the interest we'd each personally make. That isn't really using OPM, but if neither or both of us didn't want to loan our money, we could have gotten it from a bank , at probably less interest, and it would be using OPM.

Most people with a significant amount of money, do not keep it in a savings account drawing a fraction of a percent interest. They will have CDs, mutual funds, deferred comp, 401ks, IRA's that their money is in. Things you can't go to a bank or whatever, and say I want to withdraw $100k and walk out with the money. It will take a while, and there may be withdrawal penalties, or maybe that money is earning more than the interest would be, so you'd want to leave it alone and just let your company get a loan. I think most people understand, that if you own stock in say, Delta Airlines, and it goes bankrupt, with millions of dollars in debt, neither you, nor the other 100's of thousands of Delta Stock holders have to pay it back. Neither do the stock holders of your company....even if you are the sole stock holder..., have to repay company debt.

But, that is enough of this debate. Anyone who doesn't understand, or isn't capable of having a corp that can get a loan without you personally co-signing. or just doesn't want to borrow money at all, in any way, shouldn't do it. It won't bother me, or any others on here that do it, or the millions of business owners all over who do it, in the least. But don't try to tell us it can't or won't work, or that it is a bad idea.
 
Using credit and borrowed money is just a tool. And like any other tool if used incorrectly it will get you into trouble. I would never borrow 100% on cattle. I know people who have done that. And they made good money but eventually it came back to bite them in the rear. If I were borrowing more than I can afford to lose I would darn sure budget in LRP.
You are 100% correct. Credit is a tool, and no company has ever reached its potential without it. But nothing is 100% guaranteed to make money. That is why I would never borrow say $100k to buy cattle, or take $100k of my money and buy cattle. But if the potential to make a profit is there, I will allow a company I own to borrow it.

And it is not like you can form an S corp or LLC today, and that company go get a sigmaure loan or line of credit with no co-signer. @ of my compnaies are 30 years old, and for years I would have to co-sign for a loan. Ist one I got without having to personally guarantee, was a $50k loan, and I had to put up the title to the company's $50k F350 and $100k LQ trailer. But eventually, the company could borrow money with no co-signer or collateral.
 
Even a huge corp such as Exxon Mobil, with billions in assets, revenue and billions cash reserves carries at least short term debt on their books.
From my 2022 4th qtr stockholders financial report:
(that is $7.2 bil they had in debt)

xom4qtr22.jpg
 
You are 100% correct. Credit is a tool, and no company has ever reached its potential without it. But nothing is 100% guaranteed to make money. That is why I would never borrow say $100k to buy cattle, or take $100k of my money and buy cattle. But if the potential to make a profit is there, I will allow a company I own to borrow it.

And it is not like you can form an S corp or LLC today, and that company go get a sigmaure loan or line of credit with no co-signer. @ of my companies are 30 years old, and for years I would have to co-sign for a loan. Ist one I got without having to personally guarantee, was a $50k loan, and I had to put up the title to the company's $50k F350 and $100k LQ trailer. But eventually, the company could borrow money with no co-signer or collateral.
That is supposed to say 2 of my companies, not @ of my companies. Damned caps lock on a computer is a diabolical plot by Moslem terrorists, to destroy America. I type with 2 fingers and my eyes on the keys. Nothing in the world worse than getting on a roll, typing something, then look up and see it all in caps These things should be located on back of the computer. This is a new keyboard I just got for this one and just now I took my knife and popped the caps lock button off. If I ever need to type a whole page in all caps. I will just hold down the shift key! :)
 
Money isn't owned until it's tax free, already taxed. Owned money can be stored in appreciating assets so inflation strategies are the responsibility of the person that owns the money.

Borrowing money to invest is just piling risk on top of risk. Using your own money all you are risking is the market changes. Borrowed money is always attached to owned assets... which means they are no longer owned.
Ok, I was misunderstanded the term "owned money". Owned money meaning money that the tax (if applicable) has already been paid.
 
That is supposed to say 2 of my companies, not @ of my companies. Damned caps lock on a computer is a diabolical plot by Moslem terrorists, to destroy America. I type with 2 fingers and my eyes on the keys. Nothing in the world worse than getting on a roll, typing something, then look up and see it all in caps These things should be located on back of the computer. This is a new keyboard I just got for this one and just now I took my knife and popped the caps lock button off. If I ever need to type a whole page in all caps. I will just hold down the shift key! :)
You are twice as fast as me, I only use one finger.

Ken
 
Money isn't owned until it's tax free, already taxed. Owned money can be stored in appreciating assets so inflation strategies are the responsibility of the person that owns the money.

Borrowing money to invest is just piling risk on top of risk. Using your own money all you are risking is the market changes. Borrowed money is always attached to owned assets... which means they are no longer owned.

Ok, I was misunderstanded the term "owned money". Owned money meaning money that the tax (if applicable) has already been paid.
So correct me if I am wrong. Owned money has already been taxed, that what makes it under your control. Now back to the argument of debt vs owned money. If an operating note is 9% and your tax rate is anywhere from 10-30% depending on how much money you made there is a cost to having both. Big businesses aim for an optimal debt to equity ratio based on the cost of debt, the return on equity they want, and other variables. Should we as cattle owners not find out what our optimal debt to equity ratio is?
I know some of you don't care as much about maximum efficiency as you do being debt free and that's fine for your operation. But for the sake of educational discussion it would be nice to see something other than "debt is risky" and "you'll go broke with debt on cows" from the debt free crowd. Besides, I am young so a small amount of risk doesn't bother me. If every asset I hold(owned by me and the bank) evaporated tomorrow I could pay all my debt off in a few years working at McDonalds. So why not use a reasonable amount of debt to help speed up the growth process?
 
The cattle as an investment can very a large amount thru no action on your part. When the mkt is down and the note is due:eek:.


Roll high and sleep in the street is what the old-timers said.
 
The cattle as an investment can very a large amount thru no action on your part. When the mkt is down and the note is due:eek:.


Roll high and sleep in the street is what the old-timers said.
That's true of course. But there are ways to be sure you can make the payment each time. First off buying right, and not owning 100% of what they may be worth in a down market. Along with tools like LRP insurance. Helps to have a banker that understands the cattle market. One that can give good advice at buying and selling time.
 
That's true of course. But there are ways to be sure you can make the payment each time. First off buying right, and not owning 100% of what they may be worth in a down market. Along with tools like LRP insurance. Helps to have a banker that understands the cattle market. One that can give good advice at buying and selling time.


I would think it would be a very long drive to find a banker that could be trusted for cattle advice! The insurance would be a must have.

If it is a fair amount of cattle you should look at locking in some of your feed cost. A dry few months will make feed costs rocket past the point of leaving any profit.

You are doing the correct thing by looking at your options before you dive in.(y)
 
The cattle as an investment can very a large amount thru no action on your part. When the mkt is down and the note is due:eek:.


Roll high and sleep in the street is what the old-timers said.
I know of a drilling contractor that did that in 1986 when the price of oil suddenly dropped to around $12/bbl and that contractor had borrowed $$ from a Houston bank to operate while taking a percentage of the wells' production as payment. I worked for that company (which had been pokin holes in the ground since before ww2) and we all just about ended up sleepin in the street when the bank called the note.
 

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