Bowler hats, gorillas and Krugerrands: what Brian Winterflood’s Square Mile teaches us about every crisis since
Brian Winterflood buried Krugerrands in his garden in 1974. What the City veteran’s testimony reveals about every financial crisis since.
Sometime around 1974, Brian Winterflood did something that sounds eccentric until you understand the year. He buried Krugerrands in his garden.
Winterflood was already an experienced market maker by then, one of the most respected figures in London’s jobbing community. He had watched the stock market lose more than half its value in the space of a year. The secondary banking crisis had brought down Slater Walker and dozens of smaller institutions. Inflation was climbing towards 25 per cent.
The property market had collapsed. There were power cuts, a three-day week, and a genuine question about whether the system itself was going to hold. Buying gold and putting it in the ground was not irrational. It was the considered response of a professional who had seen enough to know that the worst outcomes are always underpriced.
The Street-Smart Trader, Ian Lyall’s account of the City from the inside, opens with Winterflood’s testimony. It establishes something the book keeps returning to: financial crises are not the exception to normal life in the Square Mile. They are the recurring shape of it.
The City that Winterflood came up through
The City that Winterflood came up through bears almost no resemblance to the one that exists today. The post-war Stock Exchange was a gentleman’s club with fixed commissions and a strict separation between brokers and jobbers. An unwritten code of conduct was enforced mainly through social pressure and the threat of being blackballed at lunch.
Bowler hats were still commonplace on the trading floor into the 1960s. Outsiders were not welcome, women were largely absent, and the pace of transactions was set by handwritten tickets. What held it together, more than any formal regulation, was personal liability.
Firms were partnerships. Partners put their own money at risk. A bad trade was not an abstract entry on a balance sheet. It was a threat to the house in the suburbs and the school fees.
That concentrating mechanism did more to maintain discipline than any rulebook. It served as the City’s primary check against the kind of financial crisis that unlimited personal liability makes genuinely unthinkable.
Big Bang and what the City lost
Big Bang in 1986 changed all of this comprehensively and very quickly. Fixed commissions were abolished. The broker-jobber separation ended. American and European banks moved in and capital flooded into the City.
The partnership model gave way to corporate structures where losses would be borne by shareholders rather than by individuals. The gentleman’s club became a global marketplace. The gains were real and large. But something was also lost in the rewiring.
The City became structurally capable of taking risks that no individual, gambling with their own capital, would ever have been willing to accept. That shift in structure, more than any individual decision or product failure, is what made subsequent financial crises possible at the scale they reached.
Financial crises and the recurring pattern
The 2007 to 2009 financial crisis was the most dramatic demonstration of what that could look like at scale. The losses were not the result of ignorance. The people packaging and selling mortgage-backed securities were not idiots.
They were operating inside a system that had, over two decades, quietly removed the mechanisms that used to link personal consequence to institutional risk. Winterflood, watching events unfold in 2008, described it as the worst he had seen since the 1970s. Coming from someone who buried gold in the garden in 1974, that was a pointed comparison.
Most financial crises since then have carried the same structural fingerprint. Asset prices rise and convince enough participants that conditions have changed permanently. Then a trigger arrives that reveals they have not.
The March 2020 dash for cash illustrated this at extraordinary speed. Fund managers sold equities, bonds, gold, and almost everything else to meet redemptions and margin calls in the first days of the pandemic. What made the financial crisis familiar was the underlying dynamic.
Liquidity that had appeared abundant to every participant individually turned out, when everyone needed it simultaneously, not to exist. That is the same lesson as 1974, as 2008, as every squeeze that came before.
The September 2022 liability-driven investment crisis in the gilt market was more specific in its mechanics. Pension funds running LDI strategies had used leverage to boost their returns on long-dated gilts. When the Kwarteng mini-budget sent yields sharply higher, those funds faced margin calls they could not meet without selling gilts at the worst possible moment.
The Bank of England stepped in on 28 September 2022 with emergency bond purchases, buying two weeks to allow funds to reduce their exposure.
The specific product was new. The mechanism, forced selling by leveraged holders into an illiquid market, was not. Every student of financial crises would have recognised the shape of the thing.
In March 2023 it was Silicon Valley Bank, then Credit Suisse within the same fortnight. SVB’s problem was straightforward in retrospect: it had funded long-duration bond positions with short-duration deposits, a classic maturity mismatch. When rates rose and depositors asked for their money back, the mismatch became visible.
Credit Suisse had been eroding its capital and credibility for years. The Swiss National Bank arranged a rescue by UBS over a single weekend. Regulators reassured markets that contagion had been contained.
It had been, that time. Winterflood would have recognised the shape of both financial crises immediately.
The lesson that keeps returning
The useful lesson from his testimony is not that financial crises repeat themselves identically. They do not. The useful lesson is that each generation of market participants arrives to find a system that feels stable. They then discover, eventually, that stability was a temporary condition rather than the natural state.
The instinct to treat the current episode as uniquely unprecedented is an almost universal feature of every crisis. It is almost universally wrong.
The products change. The leverage ratios change. The regulatory frameworks change. The underlying mechanics of panic and forced selling do not.
Our guide on building a balanced portfolio covers how retail investors can structure their holdings to reduce exposure to exactly this dynamic. The principles Winterflood’s era produced remain relevant precisely because the underlying mechanics have not changed. Understanding why financial crises take the form they do is more useful than trying to time them.
Burying Krugerrands is, in most environments, unnecessary. The orientation that produced the instinct is not. Winterflood’s career is a reminder that the most durable edge in markets is not a model or a strategy. It is the knowledge that financial crises are part of the structure rather than interruptions to it.
Our piece on who actually profits from M&A deals looks at how the professionals Winterflood knew position themselves through cycles.
This post is drawn from The Street-Smart Trader by Ian Lyall. Republished with permission.
Street Smart is a series drawn from first-hand experience of the City of London, updated as each new chapter arrives.
Disclaimer: The value of investments can go down as well as up, and you may get back less than you invest. This article is for informational and educational purposes only and does not constitute financial advice. Always do your own research and consider seeking independent advice before making any investment decision.