[In January of 2021, I published a newsletter advising readers not to invest in the Green Bubble, or Grubble, as I called it. Climate change-related stocks were set to crash, as all bubbles do. Today, I’d like to share the nature of that warning with you. And then I hope you’ll ask yourself whether the same warning might apply to any other asset classes…]

In 1212, German and French children decided to retake the Holy Land.

Sure, financial history is full of folly. But I think this particular piece of history takes the cake all round.

Not that it isn’t heavily debated. Actual events probably differ from the story I’ll tell you today. But still, the story is insightful for investors. So, here’s how it goes…

The crusaders left Northern France under the leadership of Stephen of Cloyes, and Germany under the leadership of Nicholas of Cologne. Both were shepherds. The fate of their two voyages often gets woven into a single and therefore more fantastical story. But let’s start with the Germans…

They massed near Cologne and headed over the Alps. Two thirds died and others went back home. But 7,000 did actually make it to Genoa. The Genovese were supposedly impressed by the pious lot and took pity when the Mediterranean Sea failed to dry up before them as Nicholas had promised. The traders even offered passage. And some kids took up the offer.

But their leader didn’t join the trip. He went on to meet the Pope instead…

But the pope told Nicholas to return home. Nicholas died on his way back across the Alps. And his father was supposedly hanged by the parents of the children who hadn’t come home. (Svante Thunberg should take note.)

In the end, none of the group is reported to have even reached the Holy Land, let alone converting the population there to Catholicism as predicted.

The French fared no better. Their 12-year-old leader Stephen had claimed to have a letter from Jesus for the King of France. Several young miracle workers joined his cause, which numbered 30,000 at one point.

When the French King refused to even see them, the movement changed their goal and headed for Jerusalem instead. They got as far as Marseille before turning back…

On the road to nowhere

The idea of all this being a “Children’s Crusade” emerged after the events. Of the 50 estimated historical sources covering the Children’s Crusade, about 20 from the time appear credible according to one historian. I think it’s fair to say historians agree that something of the sort happened anyway.

Plenty of late additions to the tale, such as the children being sold into slavery in Tunisia instead of being taken to the Holy Land, appear to be bogey-man stories designed to get children to eat their vegetables and content themselves with holidays in southern France instead of more exotic locations.

And the whole story may well be a bit of a misunderstanding, with the word for “working poor” confused with the word for “children”. Who knows?

But this isn’t about the Children’s Crusade per se. It’s about Extraordinary Popular Delusions and the Madness of Crowds, to borrow a relevant book title. The ability of humans to do extraordinary and delusional things.

Humans in groups have so often made bizarre trends occur. In financial markets they are especially observable because of price records. But they can happen anywhere.

One of the most fundamental duties of newsletter writers is to warn that such delusions and madness are… delusions and madness. My mentors and their mentors in turn did so. We are amongst the few who have the incentive to call out naked emperors.

Today, we warn you that the climate change movement and green bubble is today’s Children’s Crusade.

But first, the disclaimer…

This isn’t about climate change itself

I haven’t got much of an opinion on climate change. Nor on environmentalism. Nor on religion.

But I can spot the trends that are playing out around us. And the popular climate change movement, as opposed to the science, is exhibiting many traits of the bubbles and delusions of the past remarkably well.

Just as it is reasonable to disagree with the many actions of Neil Ferguson without being sceptical about Covid-19, it is possible to criticise the climate change movement without focusing on the science of climate change itself. Doubting the Children’s Crusade didn’t make the Pope less of a Catholic.

And the relevant reason to discuss all this is simple. It has investment implications. Those wanting to avoid the Climate Crusade’s effects in financial markets, which are vast, still have to figure out what they want to do with their money. And that’s hard in an age when the delusion is so strong it has infected even the companies you might think are immune.

So, don’t mistake me as a sceptic of climate change. (I don’t know if I am.) I’m a sceptic of any movement that exhibits the markers of Extraordinary Popular Delusions and the Madness of Crowds. And I pay attention to the ones that cause financial bubbles. Be that tech stocks, house prices or this month’s topic, green stocks.

When the Mediterranean Sea doesn’t dry up…

There are rather a lot of similarities between the climate change hysteria and the Children’s Crusade. The most obvious one being the leader Greta Thunberg.

Nicholas meeting the Pope in Rome, circa 1212

Source: Twitter

But it strikes me as equally inappropriate to put a child on a pedestal as to tear one down. Perhaps that’s why children are used in this way. You can’t criticise them without coming across as a bit of an overzealous grump. The best the sceptics could do in response is wheel out their own child icon, Naomi Seibt.

Do you see what I mean about the gap between a movement and science…?

[The article went on to look at the history of failed predictions by climate change scientists, which can still compete with failed predictions by epidemiologists from our recent pandemic. And, more importantly, we recommended investing in a certain type of energy stock. Green stocks have since crashed and fossil fuel energy stocks boomed. But my point here is that financial market bubbles do occur and it can be dangerous to speculate in them. Are there any around you now?]

Nick Hubble
Editor, Fortune & Freedom