Month: August 2014

Since in the New Normal no geopolitical events appear to have any adverse impact on risk and asset prices (because the central banks are always there to protect investors should the market “plunge” by say 5%) with general newsflow completely irrelevant on what has been a straight line up in the S&P since the announcement of QE4 in December 2012, one might as well see how much further geopolitical events can be pushed further before it all crashes.

In other words, time for this weekend’s geopolitical update.

Overnight both Pakistan and Iran have done their best to add to the geopolitical instability, which has already englufed Ukraine, and half the middle-east and north Africa, when on one hand Indian and Pakistani troops intensified firing across the border over the weekend killing at least four, an Indian official said on Sunday, straining ties between the arch rivals who recently called off top-level diplomatic talks. On the other moments ago news broke that Iran had shot down an Israeli spy drone heading for Iran’s Natanz nuclear enrichment facility.

Taking these one at a time.

First, Reuters reports that lime last week India said its foreign secretary would not meet with her Pakistani counterpart as scheduled on Monday because of plans by Pakistan to consult separatists from the border state of Jammu and Kashmir ahead of the meeting.

The cancellation dashed any hopes of near-term peace deliberations, chances of which had risen after Pakistani Prime Minister Nawaz Sharif attended the inauguration of Indian Prime Minister Narendra Modi about three months ago.

 

The Himalayan region of Kashmir has been a bone of contention between India and Pakistan since both countries became independent in 1947. They have fought three wars and came close to a fourth in 2001 and there have been regular clashes on the Line of Control that divides Indian- and Pakistan-controlled Kashmir.

 

Giving ammunition to hawks on both the sides against resuming talks, firing across the border has picked up.

 

According to India’s Defence Ministry, there have been 70 ceasefire violations by Pakistan in Jammu and Kashmir since Modi took over.

Naturally, both sides accused each other: “Pakistani troops violated ceasefire again today and restored to heavy firing targeting 22 Border Security Force (BSF) posts,” BSF Inspector General for Jammu frontier, Rakesh Sharma, told Reuters. Sharma said two people were killed on Saturday and four were injured, including a BSF man. “We gave them befitting reply causing equal casualties on their side,” he said. On the other hand, Pakistani military sources said on Saturday night that in July and August BSF had committed 23 ceasefire violations by resorting to unprovoked firing. Pakistani media reported on Sunday that three people were killed and 11 injured in “unprovoked firing” by Indian troops.

The fact the cross-border violence has resumed just as Pakistan is facing its own internal political crisis, with the movement of Imran Khan seeking to destabilize the Sharif government and lead to a political overhaul (in the process throwin some choice words America’s way), will hardly facilitate a prompt de-escalation of hostilities.

In other news, Iran said it had shot down an Israeli spy drone that was heading for its Natanz nuclear enrichment site, Iranian media reported. “The downed aircraft was of the stealth, radar-evasive type and it intended to penetrate the off-limits nuclear area in Natanz … but was targeted by a ground-to-air missile before it managed to enter the area,” state news agency ISNA said, citing a statement by Iran’s Revolutionary Guards.

Israel’s desire to halt Iran’s nuclear enrichment process has been ongoing for years, and was the reason for the first infamous “Red Line” comment made several years ago at the UN by Israel’s Netanyahu. Iran and six world powers are trying to negotiate an end to the standoff which has led to damaging economic sanctions imposed on the Islamic Republic.

Israel, widely assumed to have the Middle East’s only atomic arsenal, demands Iran be stripped of all nuclear technologies, something Tehran rules out and which most foreign diplomats deem unrealistic.

 

Iran has accused Israel and its allies in the West of assassinating its nuclear scientists and attacking its nuclear sites with computer viruses. Israel has always declined comment on such accusations and on Sunday its military said it did not comment on foreign reports.

 

The Revolutionary Guards said of the drone incursion: “This wily act further exposed the Zionist regime’s adventurous temperament and added yet another black page to a record filled with crime and mischief.”

 

If confirmed, an aircraft built by Israel’s state-owned Aerospace Industries known as the Heron, or the more powerful Heron TP, is likely to have been involved for such a long-range mission. Military commanders in Israel have described both as a possible means of monitoring Iran and other countries.

Of course, Iran could be merely pulling an Ukraine and making it all up just to make Israel’s foreign standing appear incompetent in the global arena, although it will have to work very hard for it to attain “America incompetence” status.

Finally, Al Jazeera reported that Islamic State fighters have seized the Tabqa military air base, the last stronghold of the Syrian army in Raqqa province, a monitoring group said. The Syrian Observatory for Human Rights said clashes were still taking place on the outskirts of the airport on Sunday, but the facility was under the group’s control and strewn with bodies of “dozens” of soldiers.

Syrian state television, meanwhile, reported the “evacuation” of the airport, citing a military source. “After heavy fighting by the forces defending the Tabqa airport, our forces implemented a regrouping operation after the evacuation of the airport,” state television said in a breaking news alert.

 

It added that army troops were launching “precision strikes” against “terrorist groups in the area, inflicting heavy losses”.

 

Regime forces had repelled three previous attacks on the base. Warplanes backed forces on the ground and carried out six new raids on Sunday on different targets.

 

The air base is one of the most significant government military facilities in the area, containing several warplane squadrons, helicopters, tanks, artillery and ammunition.

 

Rami Abdel Rahman, director of the Britain-based Observatory, said the fighters had also seized several checkpoints, hanging up at one the head of a soldier who had been killed in the fighting and decapitated.

And speaking of ISIS, the “Junior Varsity” al-Qaeda has once again managed to unite not only the US and Syria (which was bomed by the former fore several years giving rise to ISIS in the first place), but also Iran and Iraq, with the former sending “hundreds of troops into Iraq to join battel against the Islamic State.”

Hundreds of soldiers crossed the border on Friday in a joint operation with Kurdish Peshmerga forces to take back Jalawla in Diyala province, an official Kurdish source who asked not to be identified told Al Jazeera. He said the Iranian forces retreated back across the border early on Saturday.

 

Foreign Ministry spokeswoman Marzieh Afkham dismissed the reports of any Iranian military presence in Iraq.

 

According to the official IRNA news agency, she said Tehran “has a close watch on field developments in Iraq sensitively with regards to mutual cooperation and international commitments and takes into consideration cooperation with the Iraqi government”.

Wrapping up the ISIS coverage, also over the weekend, Qatar, the state long suspected, and confirmed, of funding not only Syrian rebels but also ISIS, spoke up rejecting “accusations of giving financial support to fighters of the Islamic State group who have seized large swathes of territory in Iraq and Syria, and condemned their “barbaric” murder of a US journalist.”

Foreign Minister Khaled al-Attiyah’s comments on Saturday came a day after the German government apologised for remarks by a minister accusing Qatar of financing the self-declared jihadists. Attiyah described the comments as ill-informed.

 

“Qatar does not support extremist groups, including [the Islamic State], in any way. We are repelled by their views, their violent methods and their ambitions,” he said in a statement released in London.

 

“The vision of extremist groups for the region is one that we have not, nor will ever, support in any way.”

The best news: Obama is heading back to DC from his well-deserved 2-week vacation, and is sure to make all of these geopolitical troubles promptly go away.

via Zero Hedge http://ift.tt/1woIF6w Tyler Durden

Submitted by David Stockman via Contra Corner blog,

Janet Yellen has essentially confirmed QE’s demise; good riddance. Unfortunately, I don’t think that is the final end of QE in America, just as it hasn’t been the end time after time in Japan (and perhaps now Europe treading down the same ill-received road). What’s interesting is really watching these central bankers talk themselves in circles about why that is. At the start of each program, there is no ambiguity, largely because of both inordinate faith in regressions and rational expectations theory that posits central bankers’ greatest work is in self-fulfilling prophecy – QE only works if you get people to believe in it.

But believing and acting are two separate and distinct functions that follow very different lines even for some of the same reasons. The premise of QE is rather dastardly, going all the way back to IS-LM and Samuelson (who admitted later how ill-suited such an academic framework was for anything outside of a classroom). What matters is the rate of interest next to the natural rate of interest. But in a real world where 0% represents a very real boundary, all that is left if interest rates at zero remain above the “natural” rate is to shift expectations toward “inflation.”

To gain a foothold below the natural interest rate, in IS-LM, is to shift focus to the real interest rate, and thus make the primary variable inflation. But that isn’t what really happens, either, as it is not inflation that moves but inflation expectations – again rational expectations theory. QE debasement seems to conform to what economists model of lay interpretations of inflationary sourcing, so the idea passes cursory logic, though, as Samuelson noted, only in a basic, low-variable and static environment.

The “markets” (or at least mainstream commentary seeking to provide post facto causation) seem preoccupied with “hawkishness” vs. “dovishness” when in fact QE was already on its way out as early as February 2013. When Fed Governor Jeremy Stein openly stated the “reach for yield” conundrum it was an implicit reference to the idea, long denied, that QE has very real costs.

Nevertheless, I want to urge caution here and, again, stress how hard it is to capture everything we’d like. As I said, ideally we would total all of the ways in which a given asset class is financed with short-term claims. Repos constitute one example, but there are others. And, crucially, these short-term claims need not be debt claims. If relatively illiquid junk bonds or leveraged loans are held by open-end investment vehicles such as mutual funds or by exchange-traded funds (ETFs), and if investors in these vehicles seek to withdraw at the first sign of trouble, then this demandable equity will have the same fire-sale-generating properties as short-term debt.18 One is naturally inclined to look at data on short-term debt like repo, given its prominence in the recent crisis. But precisely because it is being more closely monitored, there is the risk that next time around, the short-term claims may take another form.

In other words, less than two months after expanding QE3 to QE4 (UST “buying”) Jeremey Stein was essentially describing the downside of the crowded trade in a system with very narrow, potentially, exits. And while he was right to look for other possible exit bottlenecks, the repo market, despite all its new “monitoring” has not been very encouraging of late.

A few months later, Ben Bernanke began talking taper, referencing repeatedly that the FOMC was seeing recovery in the economy and stressing the improvement in labor. The global dollar disruption caught the Fed unaware, staggered their commitment to the straight-line ending of QE, but did not, ultimately end it. In fact, when in September 2013 the FOMC “shocked” expectations by not tapering the FOMC simply noted it was awaiting “confirmation” that the economy was still on track, as they were undoubtedly intimidated, but ultimately unphased, by the dollar episode and credit market selloff.

That came sometime in October and November, apparently, as the FOMC tapered last December.

That, I think more than anything, clarifies this entrenched trend. Supposedly the economy provided confirmation at the very moment of the worst Christmas shopping season since 2009, a very noticeable inflection in capital goods investing (with companies for “some reason” shifting cash to financialism instead) and what would turn out as a very severe contraction in GDP by Q1 (even though initial expectations and estimates were for a positive number, it was still near-zero and looked pretty bad in its own right initially).

A Federal Reserve policy that is committed to a data-driven approach, as proclaimed repeatedly in the past two years, would have further paused under such observations. Even the vaunted Establishment Survey stumbled in the winter, which had to be very unnerving to anyone actually committed to the data instead of pre-programmed monetary deceleration.

And that is what I think has been ongoing again since at least February 2013. QE is on autopilot to its end, not because of “incoming data” but because of secular stagnation. This is an idea that has infected nearly every facet of central banks since Mario Draghi’s euro promise (and perhaps even before then in a more quiet and reserved fashion). This is certainly been a topic for some time given Japan’s persistent failure, and the longer the US and Europe, indeed the world, goes without recovery the more it looks as if the theory holds consistency with observation.

It should go without saying that I pretty much disagree with nearly everything that Paul Krugman says, writes and thinks, but there is surprisingly enough room to see and observe where we do agree and the implications of that. Writing in the New York Times back in November 2013, Krugman noticed:

We now know that the economic expansion of 2003-2007 was driven by a bubble. You can say the same about the latter part of the 90s expansion; and you can in fact say the same about the later years of the Reagan expansion, which was driven at that point by runaway thrift institutions and a large bubble in commercial real estate.

So far, so good.

But as Larry [Summers] emphasizes, there’s a big problem with the claim that monetary policy has been too loose; where’s the inflation? Where has the overheated economy been visible?

The closed economy theory strikes again, whereby Paul Krugman efficiently describes the symptoms of the problem and then immediately denies the most logical, intuitive and consistent explanation for it because asset bubbles do not conform to the economist’s definition and consideration of inflation?

That is not some trivial distinction, as everything that comes thereafter is corrupted by that blindness. Where this all becomes most relevant (and there is a lot here that is really important, but consumes far too much space, even more than this already long exposition) to “dovishness” vs. “hawkishness” in the current circumstance is the implications for “secular stagnation” in terms of policy. The inability to see the economy as it is causes the Krugmans and Larry Summers of the world to theorize that economic growth “needs” asset bubbles to take place. And part of the reason for that is a downshift in the natural rate of interest, even to the point of being negative on a persistent basis.

Therefore, in the IS-LM worldview, the Fed has no choice but to push interest rates down with the natural rate, causing serial and perpetual bubbles along the way. Instead of seeing financialism as the primary reason for the “declining natural interest rate”, such that it actually exists in any form, they put the cart before the horse, instead remaining unquenchably curious as to why economic potential is mysteriously eroding and thus “needing” asset bubbles. That is where the most comedy is observed, as they try to come up with various reasons for that and even more wild desires for getting out of it.

Krugman again:

This is the kind of environment in which Keynes’s hypothetical policy of burying currency in coalmines and letting the private sector dig it up – or my version, which involves faking a threat from nonexistent space aliens – becomes a good thing; spending is good, and while productive spending is best, unproductive spending is still better than nothing.

Others have posited equally ridiculous ideas, including a distinct “lack of war” in the past few decades as “explaining” why the natural rate of interest may be falling so consistently. That is all pure nonsense as it contours far too closely to short-term thinking at the expense of the long-term, a Keynesian impulse at the heart of far too much folly. What bends lower the productive trajectory of the economy is unproductive spending taken in the name of such short-term consideration. Wasting resources is a net negative, not neutral as Krugman and the monetarists simply assume. They see these resources as otherwise idle, and thus opportunity cost is greater than profitable considerations.

Where monetary policy comes in is that it has the unique ability to allow unproductive spending and investment to remain undiscovered far longer than it should – through exponential debt. You can fund “bad” ideas for a long time when the “reach for yield” reaches itself for extreme levels. You get exactly what the Keynesians want, “several years of much higher employment” and investment, but the net cost is not zero as they imply, it is at the expense of future growth as so much unprofitable waste demands reversion to the mean or a return to productive balance.

This is what Stanley Fischer so conspicuously missed in his speech last week, as the flow of wasted resources is not simply raw materials and labor, but financialism as well.

Currently, even policymakers who are willing to concede that the liquidity trap makes nonsense of conventional notions of policy prudence are busy preparing for the time when normality returns. This means that they are preoccupied with the idea that they must act now to head off future crises.

And so QE is on autopilot to its end, regardless of incoming data. The secular stagnation theory, that I think has been fully absorbed in certainly Yellen’s FOMC, sees little gain from it because, as they assume, the lackluster economy is due to this mysterious decline in the “natural rate of interest.” Therefore QE in the fourth iteration accomplishes far less toward that goal, especially with diminishing impacts on expectations in the real economy, other than create bubbles of activity (“reach for yield”) that always end badly. What Krugman and Summers call for is a massive bubble of biblical proportions that “shocks” the economy out of this mysterious rut, to “push inflation substantially higher, and keep it there.” In other words, Abenomics in America.

While Yellen’s FOMC and Paul Krugman and his acolytes may differ on specific prescriptions, they are very much just different sides of the same coin. To them, an economy is generic activity that must be obtained because the opportunity cost of doing nothing is positive and their view of wasting resources in that paradigm is of zero consequence. That is nonsense, because an economy is the creation of wealth that is axiomatically tied to profitable enterprise, which indisputably is ruined by so much waste.

In the end, secular stagnation might unite orthodoxists and those opposed to them as an observation, but certainly not how and why that may have come about. Japanification is becoming universal, and the more these appeals to generic activity and waste continue, the tighter its “mysterious” grip. For now, though, QE is done (for now) in the US no matter how bad the economy gets.

via Zero Hedge http://ift.tt/1nqjGGx Tyler Durden

In some practical sense, even if not calendar-true, the week ahead is the last week of summer in the northern hemisphere.   September could very well set the tone for the remainder of the year, but before we get there, the week ahead demands some attention.

 

Three drivers are evident:  the initial conditions of the markets, the data and geopolitics.  By initial conditions, we refer to the recent price action in the capital markets.  Stock and bond markets remain firm.

 

The S&P 500 has recovered fully from the late-July through early August decline and has reached new record highs.  The major European bourses peaked earlier (UK in May, Germany, France, Italy and Spain in June), but have also been recovering over the last couple of weeks, though remain lower on the month.   The Nikkei’s multi-year high was recorded at the very end of last year, though the recent rally has brought it toward the five-month high set at the end of July.  MSCI’s emerging equity market index reached its highest level since August 2011 before the weekend.

 

Bond markets have also generally rallied.  Despite a string of strong US economic data and the prospect of more to come, the US 10-year Treasury yield struggles to rise above 2.40%-2.50%.  Germany’s 10-year bund yield is below 1.00%.  Even the peripheral European bond yields continue to make record lows.  Japan’s 10-year bond yield finished last week at 50 bp, while Switzerland’s was at 48 bp, which is about where the US 2-year yield finished.

 

While Germany pays nothing to pays nothing to borrow for 2-years, France pays 4 bp.  The US borrows for six months at five basis points.  EONIA has fallen to about half of a basis point, and there is nothing to stop it from going negative.   On the other hand, the premium emerging markets pay over US Treasuries (EMBI+) is near the middle of the 280-320 bp four-month trading range.

 

After a poor start to the year, the US dollar has performed better recently.  The heavily European-weighted Dollar Index is at its highest level since last September.  On a trade-weighted basis, the dollar is near its best level since July 2013.  If the decline in the euro has eased conditions in the euro area, as ECB President Draghi has suggested, the dollar’s appreciation has tighten US conditions, on the margin.

 

The dollar has been in a narrow JPY101-JPY103 trading range since April and broke out last week to set a seven-month high near JPY104.20.  Japanese investors have stepped up their purchases of foreign assets, and speculators have been aggressive sellers.  The gross short CME futures position has risen from about 66k contracts (JPY12.5 mln per contract) to 105k in the past four weeks.

 

Sterling, which had been the market’s darling until the middle of July amid ideas that the BOE could hike rates this year, has fallen out of favor.  It has fallen for seven consecutive weeks, with a five-month low set before the weekend.

 

The point of this overview is to suggest two things:  First, the markets are extended from a technical point of view.  Second, the markets are trending, and investors like trending markets, which means there is greater participation.

 

The economic data in the week ahead will likely reinforce the sense that the US economic strength contrasts with developments in Europe and Japan.   The most important US data include the volatile durable goods orders and the July readings of personal income and consumption.

 

The headline durable goods orders risk surprising on the upside as Boeing orders surged.  Although there are skeptics, especially among armchair economists, but this is one of the functions of seasonal adjustments to the economic data.  Auto-related orders also may show strength.  Excluding transportation orders, a 0.5% rise is expected, but we suspect the risk is on the upside.  

 

Personal income and consumption are set to start Q3 on a softer note.  Monthly increases of income average 0.4% in Q2 and 0.6% in Q1.  In July, it is expected to have risen by 0.3%.  Similarly, personal consumption increased by an average of 0.3% a month in Q1 and Q2, but in July may have risen by 0.2%.  We suspect this speaks to the shifting composition of growth.  The core PCE deflator, which for the Fed has a privileged place, is likely to have remained stable at 1.5%. As it the typical pattern, it remains below the core CPI (1.9%).  

 

The euro area data is likely to heighten deflationary fears.  The preliminary CPI reading is likely to slip to 0.3% from 0.4%.  Before we get the aggregate figure, Spain and German will release their estimates. Germany is unexpected to be unchanged at 0.8%, but Spain’s deflation likely deepened to -0.6% from -0.4% in July.   Unemployment for the region is likely to remain stuck at 11.5%.  M3 will draw interest.  Even though the pace of money supply growth is weak, some of the credit extension measures have shown a modicum of improvement.  

 

While the German IFO on Monday poses some headline risk, a modest decline is expected after other recent survey data, and acknowledgement by the Bundesbank that the German economy has lost some momentum.  The sanctions and counter-sanctions on Russia will not help.    Germany reports July retail sales at the end of the week.  The consensus expects it to have edged 0.1% higher after the 1.0% rise in June.  This is among the first hard numbers for Q3.  Recall that before June, German retail sales had fallen for three consecutive months.  

 

Japanese data is concentrated at the end of the week. The focus will be on three reports.  Overall household spending is likely to remain weak at the start of Q3 after contracting 3.0% year-over-year in June.  Consumer prices were likely little changed, with some risk on the downside.  Industrial output by have ticked up, but Japanese producers have been more optimistic in surveys than in practice.  It is possible, even with a modest gain in July, that the year-over-year rate dips into negative territory for the first time since August 2013. 

 

Geopolitical risks continue to run high.  Before the weekend, it had looked like an unauthorized convoy of Russian trucks may have been the beginning of an actual invasion.  The trucks returned to Russia on Saturday.  With the government closing in on the insurgents in east Ukraine, Putin has some hard decisions to make.  The situation in Iraq has taken a turn for the worse as it appears the Sunnis may have withdrawn from talks to form a new government.  The Iranians have refused to allow the UN inspectors into a nuclear facility, which while not on the agreed list, is appears necessary if an agreement is to be brokered by the new deadline in November.  

 

In addition to these issues, we note that an important political drama between China and Hong Kong will stage a new act new week.  A larger than usual Hong Kong delegation will sit in on discussions by China’s National People’s Congress on the 2017 to shape the framework that is to lead to the election of Hong Kong’s top official in 2017.  Usually only a few Hong Kong delegates have been able to attend such a meeting.  Despite more attending this year, they will have only one vote.   Activists in Macau are following Hong Kong’s lead and are set to release the results of an unofficial referendum on August 31. 

 

Investors are anticipatory by nature, and there is much to anticipate for September.  There is the next batch of US jobs data, and the FOMC will update its forecasts.  However, the greater focus will be in Europe.  The ECB will update its staff forecasts.  This will likely entail downward revisions to growth and especially inflation.  That said, many private economists expected euro area inflation to bottom out in September or October.  

 

The ECB will also launch the TLTRO facility.  At his August press conference, ECB President Draghi seemed to agree with some market forecasts for large participation in this new lending facility. However, we see downside risks.  Some players may prefer to wait and see, and participate in the December offering instead.  Others may be deterred by the scrutiny and extra reporting that will be necessary.  Some may be dissuaded by a potential stigma, or by the complication of taking on more funds as they repay the previous LTROs.  

 

In September, the EU may also announce the composition of the next European Commission that Juncker will lead.  This is increasingly important as countries begin drafting the 2015 budgets.  On September 18, Scotland will hold its referendum on whether it should be independent.  A “yes” vote seems less likely than a no vote; the impact of a “yes” vote could roil the UK markets.  We suspect the risks of this may prevent sterling from recouping a significant part of the losses suffered in the decline since mid-July.  

via Zero Hedge http://ift.tt/1wopYQt Marc To Market

First a drought, then a plague, now an earthquake: if these three aren’t enough to help boost California’s GDP, then it may be time for Krugman to resign. Oh and prepare for wine prices to become the latest participant in Janet Yellen’s inflationary “noise” parade. The reason – images such as this one showing what happens when a powerful quake hits just miles away from San Francisco’s wine area.

Earthquake at @SilverOak http://ift.tt/1l5oDsO

— David Duncan (@DavidSilverOak) August 24, 2014

The red stuff is luckily not blood:

Walgreens at Redwood St in Vallejo #earthquake #BayAreaQuake http://ift.tt/1npXkVr

— AnaBanana (@anabanana0924) August 24, 2014

As Reuters reports, and as thousands felt early this morning, an earthquake of 6.0 magnitude, the largest in the region for 25 years, shook the San Francisco Bay Area early on Sunday, waking residents and causing some power outages and minor damage, according to initial reports. NBC Bay Area reports that The Queen of the Valley Hospital in Napa has admitted 70 patients but their injuries are not expected to be serious. An office building in Napa was dechunked.

A video from the quake in progress:

The U.S. Geological Survey (USGS) said the epicenter of the quake was eight km (five miles) northwest of the town of American Canyon, on the northern edge of the Bay, hitting some 9 kilometers away from the city of Napa at a depth of 10.8 kilometers. Latest shake map below.

Randy Baldwin, a USGS geophysicist, said the tremor was potentially damaging because it was close to populated areas. He added the USGS was starting to receive reports of some damage in the city of Napa, mostly masonry and some structural damage, as well as power outages.

Local CBS news said that several fires had broken out in Napa, which is famous as a wine-growing center. A safety dispatcher for several cities, including American Canyon and Napa, said there were reports of people losing power. The latest PG&A outage map is shown below:

Police dispatchers in nearby San Francisco and Oakland said there were no reports of major damage.

“Oh I felt it. When I woke up I was lying on the floor. It kicked me out of bed,” said Keith, a man who lives in Napa and who wanted to be identified only by his first name. He said he went right into his job at the front desk of a Napa hotel, leaving his house in disorder. “The house is a mess, everything is out of the cabinets in the kitchen. Dressers tipped over.”

The quake was the largest to hit the Bay area since the Loma Prieto quake in 1989. “It is the strongest quake in a 60-mile (100-km) radius from the epicenter of this quake in several decades,” Baldwin said.

Reuters reporters in Oakland felt the quake as a long, low swell that shook gently for several seconds. “It was a shallow quake and there are lots of aftershocks,” Baldwin said, adding most were around magnitude 2 range.

The question now is whether the aftershocks, which can continue for the next several weeks and which experts will watch their distribution to determine if this quake happened on a fault line, will morph into something even stronger.

Meanwhile, here is some documentary evidence of the aftermath:

Napa hall of justice damage #earthquake http://ift.tt/1vA6nbO

— Jessette Porter (@racrmom) August 24, 2014

#EQ #earthquake #napa http://ift.tt/1l5oDsT

— Chris Lundstrom (@gadget_slave) August 24, 2014

Wine section at Safeway in American Canyon http://ift.tt/1l5oDJ7

— Anindya Chaudhuri (@andy_bms) August 24, 2014

Walmart trashed in American Canyon. #earthquake http://ift.tt/1wo3QWe

— Mike Nicco (@MikeNiccoABC7) August 24, 2014

Multiple mobile homes in Napa Valley on fire after region’s largest quake in 25 years http://ift.tt/1l5oFkt

— PzFeed Top News (@PzFeed) August 24, 2014

Finally, here is a live feed of the event from NBC:

via Zero Hedge http://ift.tt/XJwke0 Tyler Durden

via Zero Hedge http://ift.tt/1nohkI0 williambanzai7