Wednesday Night Links

• A natural objection that I expect in some of my readers is an aesthetic objection to modern church services from many non-denominational, Baptist, and quasi-Baptist evangelical churches. We are in a weird period of church history where churches who have conservative doctrine tend to have what some consider cringe aesthetics, while those with beautiful, reverent liturgies and architecture are often merely going through the motions. [The Tom File]
  
• The ultimate form of quantitative easing is the ominously named “Yield Curve Control” (YCC), unsurprisingly also pioneered by the Bank of Japan. The idea behind YCC is that the central bank just announces its intentions as to what interest rates shall be at each maturity, and then dares the market to make it otherwise. So long as the central bank is willing to back up its words with an infinite firehose of QE (or QT in the opposite case), market participants are likely to heed Martin Zweig’s mantra, “Don’t fight the Fed,” and go along with it. Sure enough, when the Bank of Japan tried this out, the announcement alone was enough to make interest rates be what they wanted. Expect this to be coming to America soon. [Mr. and Mrs. Psmith’s Bookshelf]
• Churches in South Korea are adopting chatbots to answer religious questions and assist with writing sermons. Religion often ends up being an early adopter of new technology, but through selection effects: the new technology ends up making particular kinds of religion more important ("religious art" and "art" having near-total overlap in the medieval period, Protestantism and the printing press, TV and certain strains of evangelism; and some beliefs that spread online are not described as religious today but probably will be viewed that way by future historians). It makes sense that if a religion is partly an effort to relate to the truth through a specific text, tools that are native to text can be part of that process. New media do tend to cause some mutation in beliefs, especially for new religions that have fewer institutional accretions between the believer and the text. The takeaway from this is that we should expect more and weirder religious beliefs in the future, especially as chatbots get better at determining what specific users are hoping to hear. [The Diff]
• Despite its origins as a health food for infants and invalids, malted milk found unexpected markets. Explorers appreciated its lightweight, nonperishable, nourishing qualities, and they took malted milk on treks worldwide. William Horlick became a patron of Antarctic exploration, and Admiral Richard E. Byrdnamed Horlick Mountains, a mountain range in Antarctica, after him. Back in the US, people began drinking Horlick's new beverage for enjoyment. James Horlick returned to England to import his American-made product and was eventually made a baronet. Malted milk became a standard offering at soda shops, and found greater popularity when mixed with ice cream in a "malt", for which malt shops were named. [malted milk]
• If the team you lead makes nails, you need to know everything there is to know about making nails. If the team you lead operates a restaurant, you need to be an expert, not in “management”, but in restaurants. If the team you lead sells mortgage-backed derivatives, you better know a heck of a lot about finance in general, mortgages in particular, the art of sales, and the specific world of selling financial instruments. There are a thousand reasons why this is true, but consider just one: a subordinate is failing at a task, and tells you that it isn’t because he’s lazy or unqualified but because the task is unexpectedly difficult. How on earth can a manager evaluate this claim without being able to do the job himself? [Mr. and Mrs. Psmith’s Bookshelf]
• Sodium-ion batteries have very similar economic features as LFP batteries but can have lower material costs. Sodium is much cheaper than lithium, the anode can be inexpensive hard carbon instead of graphite, and the anode current collector can be aluminum instead of copper. They also have lower fire risk and better cold weather performance than LFP, which should make pack design simpler. Many analysts think sodium-ion batteries with cathodes optimized for low cost are the end game for daily cycling stationary storage. Cell costs could be <$40/kWh with 5000-10,000 cycles and relatively inexpensive packs. The most optimistic estimates would have cycle cost approaching $10/MWh. There are >100 gigawatt hours of sodium-ion cell factory capacity planned, under construction, or ramping production. Two of the largest battery companies, BYD and CATL, are proponents. [Austin Vernon]
• Under the terms of the proposed transactions, shareholders of each Target Fund would receive shares of EIPI with a value equal to the aggregate net asset value of the Target Fund shares held by them and would become shareholders of EIPI, with the Target Funds terminating. It is currently expected that the transactions will be consummated during the second quarter of 2024, subject to requisite shareholder approvals and satisfaction of applicable regulatory requirements and approvals and customary closing conditions. Each merger is expected to qualify as a tax-free reorganization for federal income tax purposes. Each transaction is subject to shareholder approval and is a separate Merger, and no Merger is contingent upon any other Merger. [First Trust MLP and Energy Income Fund]
• Let’s examine the S&P 500® Index at a high level. The index trades for 21X earnings or 17X on an equal-weighted basis. Excluding the seven biggest names (Apple, Microsoft, Amazon, Nvidia, Alphabet, Tesla and Meta) only reduces it to 19X earnings. Further eliminating the entire IT sector, which collectively trades at 29X earnings, the index only falls to a slightly more reasonable 18X. Interestingly, 132 names in the index trade above 25X earnings, collectively accounting for 43% of the index. There are only 69 companies with a price-to-earnings ratio under 10X, and they account for 7.5% of the index. We can draw a few conclusions. Most of the US stock market is very expensive. Perhaps IT sector earnings growth will justify the valuations, but perhaps it won’t. Importantly, the weight of stocks in the index that screen as cheap is tiny. Let’s offer a hypothetical for the purpose of illustration. If cheap stocks rallied by 50%, they would trade at a mere 15X earnings, and their impact on the index would be only 375bps. After more than a decade of underperformance, the “value” component of the index has been reduced to near irrelevance. Moreover, should those stocks recover to more normal valuations, the scale of outperformance relative to the index (50% versus 3.75%) would be massive. We are not making predictions, merely pointing out how crowded one part of the US market is and how deserted is another. [Artisan Partners]
• For his influences, Quijada cites the obscure "morphophonology of Abkhaz verb complexes, the moods of verbs of certain American Indian languages, the aspectual system of Niger–Kordofanian languages, the nominal case systems of Basque and Dagestanian languages, the enclitic system of the Wakashan languages, the positional orientation systems of Tzeltal and Guugu Yimithirr, the Semitic triliteral root morphology, and the hearsay and possessive categories of Suzette Elgin's Láadan language". [Ithkuil]