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* FIEND'S SUPERBEAR MARKET REPORT *

* October 14, 2026 *

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* e-mail: fiendbear@fiendbear.com *

* web address: http://www.fiendbear.com *

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Fiend Commentary
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The Fed Can Ignore Gasoline. Consumers Can’t.

The bond market finally caught its breath Tuesday.

After weeks of almost uninterrupted selling, the 10-year Treasury yield fell to roughly 5.19%, its lowest level since late September, while the 30-year retreated toward 5.55% from last week’s 24-year high above 5.7%. The Wall Street Journal

Normally that kind of move would be welcome news for gold and silver.

Instead, the metals remained under pressure ahead of Wednesday’s CPI report. Gold slipped toward $4,150 while silver fell nearly 2% and briefly traded below $60 again. Reuters

That tells us how nervous investors have become about inflation and the next move in interest rates. Even falling bond yields were not enough to produce much enthusiasm for assets that usually benefit from them.

Wednesday morning may determine whether that changes.

The Headline Number Is Going Higher

Economists expect September CPI to rise about 0.6% for the month, pushing the annual rate to roughly 3.6% from 3.4%.

That sounds bad.

It is bad.

But the details will give the Fed plenty of room to explain it away.

Gasoline prices are estimated to have surged about 7.1% during September, potentially accounting for roughly half of the monthly CPI increase by themselves. Core CPI, excluding food and energy, is expected to rise only about 0.2%. Reuters

So Wednesday could easily produce two headlines from the same report:

Inflation accelerates to 3.6%.

And:

Underlying inflation remains relatively contained.

Guess which one WUCO is likely to emphasize.

The probability of another October rate hike remains only around 20%, while markets continue assigning close to an 88% probability to another increase by December. Reuters

Unless core inflation produces a major surprise, Warsh still has every reason to wait.

The weak September employment report gave him cover.

A relatively quiet core CPI would give him more.

The Consumer Doesn’t Buy Core CPI

There is nothing wrong with economists studying core inflation.

Energy prices are volatile. Oil can rise $10 and fall $10 without telling us much about persistent inflation pressure.

But households do not get to remove gasoline from their budgets because economists consider it volatile.

California regular gasoline averaged about $6.28 a gallon Tuesday, only around 16 cents below the state’s all-time nominal record from 2022.

Diesel averaged $8.39, within about a nickel of the record set only a few weeks ago. AAA Fuel Prices

Those are extraordinary prices.

And unlike an expensive television or vacation, fuel is difficult for many households and businesses to avoid.

People still commute.

Trucks still deliver food.

Farmers still operate equipment.

Construction companies still move machinery.

School districts still run buses.

National diesel prices remain around $6.28 a gallon, roughly 70% above levels before the Iran war began. Reuters

Eventually those costs appear somewhere else.

Freight charges.

Food.

Services.

Manufactured goods.

Or lower profit margins.

The Fed can call the first-round increase temporary.

The interesting question is whether the second round will be.

And Oil Is Moving Back Up

Tuesday briefly offered some relief when Brent crude slipped below $106.

It did not last.

Overnight, Brent moved back above $106 after two ships were attacked in the Strait of Hormuz and Houthi forces struck near Saudi energy infrastructure. A Saudi Aramco facility in Dhahran was also targeted. Reuters

That is the larger problem with using September CPI to make policy in October.

The report is already history.

The Fed will be looking at gasoline prices from several weeks ago while another round of attacks threatens the world's most important oil-shipping corridor today.

Even after oil flows through Hormuz recovered substantially, Brent has remained above $100 because security risks and transportation costs remain elevated. Reuters

There is no guarantee crude stays here.

A ceasefire could knock $10 or $20 off the price quickly.

Increased Saudi production and additional Russian diesel exports could also help.

But after months of repeatedly expecting the energy problem to resolve itself, betting monetary policy on another diplomatic breakthrough looks increasingly optimistic.

Bonds Finally Offered Some Relief

The decline in Treasury yields Tuesday deserves more attention than the metals selloff.

The 10-year retreated to about 5.19% after reaching roughly 5.35% last week.

The 30-year moved back toward 5.55%.

After one of the most violent bond selloffs in years, buyers are finally appearing.

That makes sense.

At yields above 5%, Treasuries are no longer merely defensive holdings. They offer substantial income.

Fund managers have begun moving money back into government bonds to lock in the highest yields seen in decades, particularly around the 10-year maturity. Reuters

Perhaps the short-term bottom in bond prices we have been expecting is finally forming.

But CPI will test it immediately.

A soft number could push the 10-year back toward 5%.

A hot core reading could erase Tuesday’s rally in minutes.

The more revealing result would be a reasonably benign CPI report followed by another rise in long-term yields.

That would again suggest the bond market is worrying about something larger than next month’s Fed meeting.

Debt.

Deficits.

Supply.

And the inflation premium investors require to lend money for decades.

The Metals Are at Their Own Crossroads

Gold and silver have also reached an interesting point.

Both have undergone substantial corrections while Treasury yields and the dollar surged.

That is normal.

Gold pays no interest. When the government offers more than 5%, the opportunity cost of owning metal rises dramatically.

But the long-term reasons investors bought gold have not disappeared.

Federal debt remains above $40 trillion.

The money supply is expanding.

The Fed is no longer conducting QT.

Fiscal deficits remain enormous.

And inflation is still nowhere near 2%.

That is why Wednesday matters.

If CPI comes in softer than expected and metals still cannot rally while yields fall, the correction probably has further to run.

If they respond strongly to lower yields and a softer dollar, the recent decline may have done enough damage to reset the trade.

Silver around $59-$60 and gold around $4,150 are becoming useful levels to watch. Reuters

December Is the Real Meeting Now

October appears largely decided.

Warsh would need something considerably hotter than the consensus CPI report to justify reversing course and hiking again only weeks before the midterm elections.

December is different.

Markets still assume another hike is coming.

But we have watched these probabilities change too many times this year to treat 88% as meaningful certainty.

If employment weakens again and oil finally retreats, December could disappear just as quickly as October did.

If headline inflation climbs toward 4% and core begins rising too, the Fed will have much less room to wait.

That is why Wednesday’s CPI report is less about October than about the argument beginning to form for December.

Warsh may be able to dismiss higher gasoline as temporary.

The bond market may even allow him to do it.

The consumer has a harder time.

California gasoline is within a few cents of record territory. Diesel is almost exactly at its record. Oil is back above $106 after another round of attacks.

Wednesday morning we will be told whether inflation is 3.5%, 3.6% or 3.7%.

For economists, the decimal point matters.

For everyone filling a tank, the price on the sign already delivered the report.

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