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Borg’s smug scowl vanished. The blood drained from his face.

To cover his short position and get Ugg’s ten logs back, Borg now had to pay two hundred and fifty sticks. He only had one hundred and twenty. He was completely, mathematically ruined.

Ugg tapped Borg on the shoulder. The giant Market Maker was holding his very large, very persuasive club.

"Price is twenty-five, Borg," Ugg rumbled cheerfully. "Borg cannot cover. Ugg taking Borg's cave now. Ugg going to use it to store more oak."

Borg fell to his knees in the snow, sobbing. He had let his frustration over a missed trade goad him into a catastrophic, spite-driven disaster. He had fought the trend because his feelings were hurt.

Grug patted Borg’s shivering shoulder. "The market does not know you exist, Borg. It does not care that you are angry. It does not care what you think the price should be. It only cares what the price is."

Grug turned to Thok, who was watching the eviction with wide eyes.

"Thok," Grug instructed. "New protocol. If I ever lose a trade, get angry, and immediately try to execute a new trade just to 'win it back'..."

"Thok hit Grug with the oak stick?" Thok offered eagerly.

"Yes," Grug sighed. "Hit me very hard. A bruised head heals faster than a bankrupt portfolio."

Part 29: The Fear and Greed Index

Borg’s eviction from his cave was a sobering event for Cave Street. The brutal consequences of emotional trading were now visible to everyone: Borg was currently sleeping under a particularly drafty pine tree, wrapping himself in his own regret and a slightly damp loincloth.

The market, however, had swung violently in the opposite direction.

The oak log bubble had burst (as the Chief eventually ran out of treasury sticks to burn), and now the valley was gripped by overwhelming paranoia. Nobody wanted to trade anything. Spreads were incredibly wide. If someone offered a premium berry, the buyer immediately assumed it was poisonous. If someone offered a stick, the buyer assumed it was rotten.

"The market is paralyzed by Fear," Grug noted, standing on his boulder. He looked down at his intern. "Thok, last week, people were buying rotten wood for twenty sticks. Today, they won't buy a fresh mammoth steak for half a berry. The fundamental value of the meat hasn't changed. The psychology of the traders has."

Thok chewed on a piece of grass. "Market is scared of Ugg's club. And termites. And blizzards."

"Exactly. But sometimes," Grug said, his eyes narrowing, "the market isn't scared. Sometimes, it is gripped by Greed. When Lom yielded a fish in the Ponzi mud pit, the valley lost its collective mind. Everyone was throwing assets into the mud. They were blinded by the promise of free wealth."

Grug realized that price alone wasn't enough information. The fat-torch charts told you what happened, but they didn't tell you how the market felt about it. He needed a sentiment indicator. He needed a way to measure the emotional temperature of the valley.

He climbed down from his boulder and found a long, smooth piece of flat limestone. He used his charcoal to draw a massive semi-circle.

On the far left side of the curve, he drew a terrified face with wide eyes and chattering teeth.
On the far right side, he drew a manic, drooling face with dollar signs—well, stick signs—for eyes.
In the center, he drew a neutral, slightly bored face.

He fashioned an arrow out of a straight pine branch and pinned it to the bottom center of the semi-circle with a sharp bone.

Grug carried his new invention to the center of the trading floor and mounted it next to the Magic Wall.

"What is that?" Ugg asked, pausing his market-making duties to look at the dial.

"This," Grug announced loudly, "is the Fear and Greed Index. It measures the aggregate emotional state of Cave Street."

The traders gathered around, murmuring.

"How does it work?" Lom asked, peering closely at the terrified face on the left.

"It is a composite metric," Grug explained, using a term he hoped sounded official. "I calculate it by observing five key indicators."

He held up a finger for each one:

Volume: "How many of you are running around screaming versus sitting quietly by your fires?"

Momentum: "Is the price moving slowly, or is it gapping up and down like a panicked gazelle?"

Volatility: "How wide are Ugg's spreads? If Ugg is asking ten sticks for a fish he bought for one, the market is terrified."

Safe Haven Demand: "Is everyone hoarding Hard Money Shells, or are they throwing them into mud pits?"

The 'Borg' Indicator: "Is Borg currently beating a rock against his head, or is he aggressively buying pelts on margin?"

"I take all these factors," Grug concluded, "and I move the arrow."

He reached up and pushed the pine branch all the way to the far left, so it pointed directly at the terrified face.

"Currently," Grug said, "we are in a state of Extreme Fear. Nobody wants to buy. Everyone thinks the world is ending because Borg lost his cave."

The crowd nodded. It was an accurate assessment of their feelings.

"But," Grug grinned, "Extreme Fear is not a time to panic. It is a time to shop. When everyone is terrified, assets are cheap. Look at Ugg. He is selling premium steaks for one berry because nobody is bidding."

Grug calmly walked over to Ugg and bought five premium steaks for five berries. A ridiculous bargain.

Over the next week, the Fear and Greed Index became the most watched tool on Cave Street.

When a rumor spread that the mammoth herds were migrating early, the valley grew optimistic. The arrow moved to the neutral face. Prices stabilized.

Then, Thok found a massive bush of exceptionally sweet berries near the river. He brought three overflowing baskets to the market. Suddenly, everyone had surplus capital. Trading volume exploded.

Grug moved the arrow past neutral, pointing it toward the manic, drooling face on the right. Greed.

When the arrow hit Greed, people started making irrational decisions again. Lom took out a margin loan to buy pointy sticks he didn't need. Borg (who had temporarily moved into a small bush) tried to leverage his bush to buy pelts.

"Look at the dial!" Grug warned from his boulder as the arrow crept toward Extreme Greed. "When the market is greedy, it is time to be fearful! The bubble is inflating!"

Nobody listened. They were too busy shouting bids at the fire.

The next morning, a family of aggressive skunks moved into the berry bush Thok had found, completely destroying the valley's primary source of sweetness. The berry market collapsed instantly.