Wells Fargo

• Bubble Paranoia Setting in as S&P 500 Surge Stirs Angst (BBG)
• But how will math PhDs determine "fair value" - Wall Street Techs Take Secrets to Next Job at Their Peril (BBG)
• U.S., EU Escalate Russia Sanctions as Putin Holds Firm (Bloomberg)
• Australia Becomes First Developed Nation to Repeal Carbon Tax (WSJ)
• Gaza humanitarian truce goes into force, hours after tunnel clash (Reuters)
• Barclays, Deutsche Bank Said to Face U.S. Senate Hearing (BBG)
• ECB Asset Buying Far Off and May Not Come, Hansson Says (BBG)
• Time Warner win would make Murdoch U.S. media king (Reuters)
• Costly Vertex Drug Is Denied, and Medicaid Patients Sue (WSJ)
• China Rallying for All Wrong Reasons to Top-Rated Analyst (BBG)
• GM recalls some cars with problematic switches; judges others safe (Reuters)

• BRICS set up bank to counter Western hold on global finances (Reuters)
• Fed's Yellen Hedges Her View on Rates (Hilsenrath)
• China GDP Grows 7.5% in Second Quarter (WSJ)
• Get More Acquainted With Your Knees as Boeing Reworks 737 (BBG)
• Israel Warns Gazans of New Attack After Hamas Rejects Truce (WSJ)
• Israel poised for Gaza incursions after truce collapses (Reuters)
• China Housing Sales Fall in First Half of 2014 (WSJ)
• IBM to offer iPads and iPhones for business users (Reuters)
• Fed's George says strengthening economy warrants quick rate rise (Reuters)

"Shiller’s body language said it all, as he squirmed and contorted in his chair during the interview. Nothing feels right about these new market highs. It’s the same squirming and discomfort we’ve been feeling for some time now. We confidently know the U.S. market is unusually expensive. We confidently know that allocating capital to expensive markets is a really bad idea. We confidently know that expensive markets usually lead to low—quite possibly negative—real returns over time. So, why the squirming? Because of what we most confidently do not know—the timing, path, potential triggers, etc., of the U.S. market correction in the short term. Yes, we have theories and coffee-room discussions, which we’ve written about in our quarterly letters. But they remain that. We truly have no blooming idea when an expensive market will break. It is the value investor’s omnipresent dilemma, with 2014 (and this quarter, in particular) testing our mettle yet again. And so, we continue to squirm and contort with the only solace that we are in good company. " - GMO

• Secret Path Revealed for Chinese Billions Overseas (BBG)
• Traders Flood U.S. With $3.4 Trillion of Bond-Auction Demand (BBG)
• Just in time to cover bad earnings in a massive $3.8 billion "one-time charge": Citi says to pay $7 billion to settle securities investigation (Reuters)
• Troubled Epirito Santo family loosens grip on Portugal's BES (Reuters)
• BES puts in place new executives after central bank push (Reuters)
• Bank of China-CCTV drama may reveal power struggle in Beijing (SCMP)
• Portugal speeds up Banco Espírito Santo management changes (FT)
• Dark pool probe builds pressure on Barclays boss (Reuters)
• Russia Vows to Respond After Shelling From Ukraine (BBG)
• Ukraine forces end rebel airport blockade (Reuters)
• Obama Contends With Arc of Instability Unseen Since '70s (WSJ)

Another round of overnight risk on exuberance helped Europe forget all about last week's Banco Espirito Santo worries, which earlier today announced a new CEO and executive team, concurrently with the announcement by the Espirito Santo family of a sale of 4.99% of the company to an unknown party, withe the proceeds used to repay a margin loan, issued during the bank's capital increase in May. This initially sent the stock of BES surging only to see it tumble promptly thereafter even despite the continuation of a short selling bank in BES shares this morning. Far more impotantly to macro risk, it was that 2013 staple, the European open surge in the USDJPY that has reset risk levels higher, while pushing gold lower by over 1% following the usual dump through the entire bid stack in overnight low volume trading. Clearly nothing has been fixed in Portugal, although at least for now, the investing community appears to have convinced itself that the slow motion wreck of Portugal's largest bank even after on Sunday, Portugal’s prime minister said taxpayers would not be called on to bail out failing banks, making clear there would be no state support for BES.

A look at key events and data in the week ahead.  

• Carl Icahn says 'time to be cautious' on U.S. stocks (Reuters)
• Banco Espirito Santo Lifts Lid on Exposure to Group (BBG)
• Slowing Customer Traffic Worries U.S. Retailers (WSJ)
• Insurgents enter military base northeast of Baghdad (Reuters)
• Obama tells Israel U.S. ready to help end hostilities (Reuters)
• Japan economics minister warns of premature QE exit, sees room for more easing (Reuters)
• Greek Banks See Quadrupling of Housing Loans by Next Year (BBG) ... to fund buybacks like in the US?
• Piggy Banks Being Raided Signal Swedish Housing Dilemma (BBG)
• London Seeks New Spenders as Russians Skip $719 Champagne (BBG)

This clown parade of clueless opinions (did we mention Goldman had BES at a buy until this morning?), stretched all the way to the very top with Bank of Portugal itself issuing the following pearl:

• BANK OF PORTUGAL SAYS BES DEPOSITORS CAN STAY CALM

Uhhh, what else would the Portugal central bank say? Panic and withdraw your deposits from a bank whose exposures to insolvent entities have been largely unknown until today (and even now).

The Fed spends an inordinate amount of time focusing on increasing Lending with the idea that loan growth increases economic activity. Is it possible that it is Interest Income derived from Savings that is more important to economic growth?

• Espirito Santo Financial Suspends Shares, Bonds on ESI Exposure (BBG)
• Europe Stocks Drop for Fifth Day as Espirito Santo Sinks (BBG)
• Espirito Santo Creditors Doubt Containment on Missed Payment (BBG)
• French Stocks Seen Extending Losses on Economy Concern (BBG)
• Stocks Slide With Portugal Bonds as Yen Gains; Oil Drops (BBG)
• U.S. Probes Hacking of Government Computers at Personnel Agency (WSJ)... finds terabytes of porn 
• It's Congress' fault: Obama rejects criticism over border crisis (Reuters)
• Israel Mobilizes 20,000 Troops for Possible Gaza Invasion (BBG)
• Chinese hackers pursue key data on U.S. workers (NYT)
• Donetsk Primed for Siege as Ukraine Army Hems In Rebels (BBG)

• Xi Says China Conflict With U.S. Would Be Disaster (BBG)
• Short selling drops to lowest level since Lehman (FT)
• Scoping the new subprime as watchdogs cry 'bubble' (Reuters)
• Carlos Slim to break up América Móvil empire (FT)
• Jury Acquits Rengan Rajaratnam in Insider-Trading Case (WSJ)
• Hamas rockets land deep in Israel as it bombards Gaza Strip (Reuters)
• Hong Kong Buyers Queue for New Homes After Prices Plunge (BBG)
• Rebel Stronghold in Ukraine Braces for Its Showdown (WSJ)
• Tiny Houses Big With U.S. Owners Seeking Economic Freedom (BBG)
• Chinese Cash-Bearing Buyers Drive U.S. Foreign Sales Jump (BBG)

"US lending to businesses is reaching record levels but banks are privately warning that the activity should not be seen as evidence of an economic recovery." And the stunner: "Much of the corporate lending is going to fund payouts to shareholders, finance acquisitions and fuel the domestic energy boom, bankers say, rather than to support companies’ organic growth."

FDIC: “the largest positive contribution to the year-over-year change in earnings came from reduced loan-loss provisions..."

• Headline of the day: Complacency Breeds $2 Trillion of Junk as Sewage Funded (BBG)
• Israel intensifies Gaza offensive after surge in rocket fire (Reuters)
• Profits plunge at Vatican bank (FT)
• Investors Are Buying Troubled Golf Courses and Giving Them Makeovers (NYT)
• Pimco Dissidents Challenge Bill Gross in ‘Happy Kingdom (BBG)
• That's a new one: Marks and Spencer blames new website for sales drop  (Reuters)
• Iran's Supreme Leader calls for more enrichment capacity (Reuters)
• Boeing Faces Long-Term Credit Risk if Ex-Im Bank Closed, S&P Says (WSJ) not to mention the collapse risk to US durable goods orders
• U.K. Manufacturing Unexpectedly Slumps Most in 16 Months (BBG)
• Some Still Lack Coverage Under Health Law (WSJ)

• Bond Anxiety in $1.6 Trillion Repo Market as Failures Soar (BBG), as reported first by Zero Hedge
• As Food Prices Rise, Fed Keeps a Watchful Eye (WSJ)
• Yellen’s Economy Echoes Arthur Burns More Than Greenspan (BBG)
• Draghi’s $1.4 Trillion Shot: Silver Bullet or Misfire? (BBG)
• Israel's Netanyahu phones father of murdered Palestinian teen (Reuters)
• Ukraine says forces will press forward after taking rebel stronghold (Reuters)
• Goldman Sachs Brings Forward Rate Forecast as Treasuries Drop (BBG)... you mean rise?
• Super typhoon takes aim at Japan (Reuters)
• Kidnapped Nigerian girls 'escape from Boko Haram abductors' (Independent)
• Merkel says U.S. spying allegations are serious (Reuters)