If you’re going to fall on your sword, it’s best if it’s gilt-edged.

Just ask departing BP boss Tony Hayward, who is in line for the sort of payout that would have most of us running into the nearest fencing shop to get the job done ASAP.

According to Robert Peston:

Tony Hayward will be able to draw a pension of around £600,000 a year from the moment he leaves the company on October 1, I have learned.

This is his contractual entitlement under the company’s pension scheme. The rules of the scheme say that those who joined it before April 6 2006 can take the pension at any point from age 50: Mr Hayward is 53.

However the pension entitlement is bound to be hugely controversial.

Mr Hayward’s pension pot had a transfer value on 31 December 2009 of £10.8m, and he had accrued a pension of £584,000 a year. The pension pot will be worth more than that by the time of his departure.

I happen to think that BP has done a reasonable job in the wake of the disaster, as I wrote when I prematurely considered BP shares good value at 435p. With the leak sealed, they’re finally inching back towards that. (Thanks Tony, for sparing my blushes!)

What’s more, I think Hayward’s main crime was to be British. They think he has a posh lar-dee-dah voice in the US, whereas to a British ear he just sounds like a geology lecturer from Warwick University.

True, he’s committed a few PR gaffs, but on a stage this big, who wouldn’t? And what do we care about – the problem being fixed or a clumsy word along the way?

Nevertheless I find it hard to stomach that any retiring employee should find themselves with a £600,000 a year pension. I have a convoluted theory for why it might not be quite as poor an outcome as it appears, but there still seems something morally suspect about it.

If it’s an entrepreneur who built his or her own business, that feels different.

Am I suffering from muddled thinking?

(Source: Peston/BBC)

News came to light this week of a Swedish tramp who died a secret millionaire:

Curt Degerman was a financial genius who used the money he earned from collecting scrap metal from rubbish bins to trade on the international markets.

Now 18 months after his death, his relatives are fighting a legal battle over a secret £1 million estate he amassed by investing in stocks and shares.

Maybe all those personal finance blogs that urge you to reuse your eggshells and grow your own popcorn are on to something?

(Source: The Telegraph)

The Guardian dug out a weird picture of Bill Gross channeling Top Gun era Tom Cruise for its recent interview with the Pimco founder. Generally the legendary bond investor rocks a Herman Munster’s Brainy Brother look.

The interview itself is more in keeping with the usual Gross line, however, albeit it modified slightly to say the UK is doomed in the near-term, but it’s the least worst of all possible options:

“The UK will try to get out of 16 tonnes of debt by reflation [low rates and high inflation] or devaluation,” Gross says. “The pound is going down and they will have to keep policy rates under 1% for a long, long time because of the housing market, and because many mortgages have a floating rate.”

All usual Gross stuff, and fine as so far as it goes. I think the Guardian should have stuck to the direct quotes, however, because I have no idea how the writer got this end of the stick:

The prospects of low interest rates and inflation, as well as a potential fall in sterling, could lose bond investors a lot of money. These scenarios could be considered a “default” in Gross’s view – hence his comparison of Britain’s debt to volatile nitroglycerine.

Wrong, and not wrong – the almost not wrong bit is if you’re an overseas investor and sterling falls you’ll obviously lose money, though I think even that trade is running out of steam.

But how low inflation would hurt bond investors is anyone’s guess! Answers on a postcard to The Guardian please.

(Source: The Guardian via Tony)

A prophetic letter from legendary investor John Templeton has apparently surfaced on the Internet. (I say ‘apparently’ because I can only find it on a couple of websites, both of which seem to be connected – and which are unfamiliar to me).

Assuming it’s not a hoax… in writing to his son in 2005, the emerging market pioneer and contrarian’s contrarian predicted the recent financial chaos:

Increasingly often, people ask my opinion on what is likely to happen financially. I am now thinking that the dangers are more numerous and larger than ever before in my lifetime. Quite likely, in the early months of 2005, the peak of prosperity is behind us.

In the past century, protection could be obtained by keeping your net worth in cash or government bonds. Now, the surplus capacities are so great that most currencies and bonds are likely to continue losing their purchasing power.

Mortgages and other forms of debts are over tenfold greater now than ever before 1970, which can cause manifold increases in bankruptcy auctions.

It gets even bleaker as you read on, which is quite depressing when you consider how right Templeton was about the mortgage banks (writing in 2005, remember):

Over tenfold more persons hopelessly indebted leads to multiplying bankruptcies not only for them but for many businesses that extend credit without collateral. Voters are likely to enact rescue subsidies, which transfer the debts to governments, such as Fannie May and Freddie Mac.

On the other hand, Sir John was a very old man, and even the most far-sighted of us can be prone to excessive gloom in our final days, for pretty obvious reasons.

Also, the man who took American investors overseas seems to discount the extra demand being brought in by billions more consumers. There’s an environmental nightmare to be solved, certainly, but not obviously a need for less capacity.

(Source: Full Templeton letter on NewsMax via Richard Beddard)

There’s a good article on blogger turned super-investor Michael Burry from the always excellent Michael Lewis in this month’s Vanity Fair.

While most of the article is about how Burry found a way to bet against the subprime market, the pen portrait is at least as fascinating:

Burry did not think investing could be reduced to a formula or learned from any one role model. The more he studied Buffett, the less he thought Buffett could be copied. Indeed, the lesson of Buffett was: To succeed in a spectacular fashion you had to be spectacularly unusual.

“If you are going to be a great investor, you have to fit the style to who you are,” Burry said. “At one point I recognized that Warren Buffett, though he had every advantage in learning from Ben Graham, did not copy Ben Graham, but rather set out on his own path, and ran money his way, by his own rules.…

I also immediately internalized the idea that no school could teach someone how to be a great investor. If it were true, it’d be the most popular school in the world, with an impossibly high tuition. So it must not be true.”

Michael Burry seems to be another of those high functioning almost autistic value investors like Buffett and perhaps even Benjamin Graham.

There’s hope for all us weirdos!

(Source: Vanity Fair article on Michael Burry)