Buying Cattle in an IRA LLC

So I came dressed for the part today. One of my favorite investments for

really a lot of reasons is Three Texas Cowmen. Two of them own ranches and

one of them owned, it's called a feed lot where when the cattle get to be a

certain age they take them to this feed lot and they feed them corn. It's

kind of like going to grandma's for Thanksgiving. You just eat all you can

eat and that's a feed lot.

When they send those cattle there, they make money on it. I mean it's a

business deal. You can buy the cattle. This one guy had a feed lot, so he

had the employees to feed the cattle and the cowboys to doctor them if

something went wrong. It's really a good way to make money. If you think

about it, the cattle get fatter every day. So whatever they bring per

pound, they make more money.

It's an area that these cattlemen understood. They were delighted when they

found out they could actually use their IRAs to do this. This investment

was a safe investment for them. It was in familiar territory, something

they were very used to with familiar people, and something they could kind

of go and kick the tires on. They could actually go see their investment.

Like one of them told me, "If this goes wrong, I can eat my IRA." As long

as you're not a vegetarian. But he said, "You can't eat an Enron stock

certificate." So they were real excited about that.

And what we did was, since there were three of them and they were going to

be equal partners, a third, a third and a third, then that means they're

below the 50% prohibited party rule. Once we set up the LLC, for each of

them to be a third owner, their IRAs, their CheckBook IRAs could make loans

to that LLC without any problem at all, totally within the guidelines.

They could joint venture with one another. "Hey, you put up the cattle.

I'll put up the money. We'll take out the expenses, and we'll split the

profit 50/50 or 60/40 or 70/30 or whatever." That's the flexibility that

they had with a CheckBook IRA. But they were just dumbfounded that they

could do that.

They were so excited to get out of the stock market. Like they said, "We

don't trust them anymore. (A) We may not even understand the company that

we're investing in, and (B) you may not be able to trust them. There are

companies that they're cooking the books, or in some cases, they're in bed

with the government and they get a good deal or they don't get a good deal.

We just don't know what we're doing."

But in this area, what the CheckBook IRA LLC did for them was allow them to

invest in something that they were very familiar with their whole life,

dealing with people that they had dealt with for a long time, being able to

actually go out and look at their investment, to make decisions, and to

make instant decisions.

Several of them talked about all of the money that's being printed up. They

said, "This protects us against inflation. It allows us to take our IRAs

and buy cattle, buy something that if inflation goes through the roof, the

cattle will go through roof, and at least our buying power will be the

same."

Well, these guys were pretty sharp. With their businesses they'd set up

corporations. So they had 401(k)s. They had SEP IRAs. They had simple IRAs.

They were glad to hear that we were able to take the different IRAs and

roll them into one IRA for them and then create the LLC to combine those

things.

It was a lot of fun. I enjoyed doing it. I have a cowboy background. In

fact, in the wintertime, I go down to Arizona and rope. In fact, I won a

saddle here last year which was kind of cool. So we talked the same talk,

but the whole idea of the CheckBook IRA is you may not understand how to

deal with cattle, but you may have other areas that you totally understand.

We had a guy who was a fisherman, a commercial fisherman and he knew that

the fishing licenses were going to go through the roof. So we set him up

with a CheckBook IRA. I don't know anything commercial fishing licenses.

But as long as it's not life insurance or collectibles and as long as he's

not buying from or selling to a relative, a close relative, it's perfectly

acceptable.

So, guess what? He takes his Roth IRA with $50,000, buys a commercial

license. They go up to a $100,000 the next year. He made $50,000 with his

Roth IRA in an area that he knew that he would do well. I mean, I didn't

know anything about it, but for him, he felt very comfortable.

And that's some of the flexibility you have with a CheckBook IRA, to be

able to invest in what you really know, what you feel comfortable with,

what you understand. That's one of the joys of having this company and

being able to help them.

So that's probably one of my favorites because I understand what they were

doing, but also I can still remember the excitement in their voices when

they realized that they could take rather sizable retirement accounts and

actually put them in something that they could make some money in, that

they felt very, very comfortable with.