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Contrarian economist Larry Summers was right all along about inflation. His ominous new prediction for what’s next.

Too far, too fast? That’s what some portfolio managers griped as the stock market plunged following the Fed’s latest rate hike on September 21. “We continue to believe that the Fed is making yet another policy mistake,” Jay Hatfield, CEO of Infrastructure Capital Management, told Fortune, arguing that the central bank’s interest rate hikes are now overly aggressive.

But Larry Summers, the cerebral Harvard economics professor and former Treasury secretary, has a very different view. In a long sit-down interview with Fortune at his home outside of Boston, he argued that the Fed will have to go much higher than most are expecting to cool runaway inflation. In fact his greatest worry is that the Fed will back off too soon. It will simply be too painful—too many lost jobs, too many 401(k)s crashing, too much blowback. He compares it to fighting an infection. “Most of us have learned that [when] the doctor prescribes you a course of antibiotics and you stop taking the course when you feel better rather than when the course prescribed is over, your condition is likely to reoccur. And it’s likely to be more difficult to eradicate the next time because the bacteria have become more resistant.” Summers worries that if the Fed backs off, “inflationary expectations will become entrenched,” and the eventual cure will be far more costly than shouldering what could be a shorter, shallower downturn in the months ahead. This reiterates what he said in June: “We need five years of unemployment above 5% to contain inflation—in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment,” Summers said in a speech in London according to Bloomberg.

Summers never bought the “transitory” argument, that inflation was a passing phenomenon caused by supply-chain bottlenecks and COVID-related shutdowns. 

For Summers, the chief source of today’s heavy inflation is over-the-top demand caused by too much money chasing too few goods. So to throttle a runaway consumer price index, the Fed must keep tightening monetary policy to the point where demand falls—sharply. Just how far does Summers think the Fed needs to go?

How long will inflation continue?

Getting to the answers is a primer in Summers’ view that the heart of economics is arithmetic. He reckons that “underlying inflation,” excluding food and energy, is running at 4% to 4.5%, pretty close to the PCEPI (personal consumption expenditure price index) numbers that guide the Fed. (The PCEPI is calculated by the Bureau of Economic Analysis and widely used by the federal government, including to adjust Social Security payments.) In the Summers playbook, taming inflation requires a “real,” Fed funds rate that’s 1.0% to 1.5% higher than the pace of bedrock inflation. 

 By his reckoning, the right number is 5.0% to 5.5%. That’s far above the current Fed funds benchmark which is at a midpoint of 3.1%. Of course, the markets and most observers expect the Fed to go big again at the next several meetings. But the Fed funds futures markets, and the members of the Open Market Committee in their most recent poll, expect the number to max out at 4.6% next year. So Summers is calling for much higher Fed funds rate, and tighter policies, than investors or the Fed itself are anticipating.

You can read the full Fortune feature about Summers’ views on inflation, the economy and more here.

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The 4-day workweek has detractors but research shows employees get more sleep—and that could reduce ‘bad work outcomes’ 

Just as not every CEO buys into remote work, not every business leader thinks a four-day workweek is right for their company. Employees do appear to get more sleep, though, when given the extra day off—and that could help the bottom line.

“Sleep and work are sort of in competition with each other,” Christopher Barnes, a University of Washington management professor, told Bloomberg this week. “When you trade sleep for work, it’s problematic. You sacrifice your health and have bad work outcomes.”

Juliet Schor, a sociologist and economist at Boston College, is tracking organizations across the globe as they experiment with a four-day week. “Employers are realizing that if they can rethink where people work, they can also rethink how many days they’re on the job,” she said in a TED talk this year.

Among workers who switched to four days, according to her, the percentage getting less than 7 hours of sleep each night dropped from 42.6% to 14.5%, and they registered 7.58 hours per night of sleep, nearly a full hour more than they did before the change.

“I wasn’t surprised that people are getting a little more sleep, but I was surprised at how robust the changes were,” Schor told Bloomberg.

In survey results released this month by the 4 Day Week Campaign in the U.K., 46% of respondents said their business productivity has “maintained around the same level,” while 34% reported that it had “improved slightly,” and 15% said it has “improved significantly.”

But skeptics remain, and the four-day week isn’t for all, including companies that have otherwise shown flexibility by embracing remote work. FleetCor Technologies, for instance, lets certain employees work from anywhere, or use a hybrid model, which it says hasn’t led to a drop in productivity, according to TechTarget.

But the Atlanta-based firm, which processes workforce payments, isn’t considering a four-day workweek. “Our customers need us seven days a week,” chief HR officer Crystal Williams told TechTarget.

In Congress, progressive California lawmaker Mark Takano introduced the 32-Hour Workweek Act in July. The legislation wouldn’t penalize companies for not adopting the four-day workweek, but it would incentivize them to do so, as they’d be required to pay workers overtime after 32 hours.

“There’s economic, political, social upheaval,” he told the New York Times in March. Americans don’t “want to return to the same old normal.”

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Con Edison to sell U.S. renewable energy units to RWE in $6.8B deal (NYSE:ED)

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Consolidated Edison (NYSE:ED) announced Saturday it agreed to sell its wholly-owned Con Edison Clean Energy Businesses to German utility RWE (OTCPK:RWEOY) in a transaction valued at $6.8B.

Con Edison (ED) said the deal will allow it to “sharply focus on our core utility businesses and the investments needed to lead New York’s ambitious clean energy transition.”

RWE (OTCPK:RWEOY) said the acquisition will nearly double its renewables portfolio in the U.S. to more than 7 GW.

In light of the pending deal, Con Edison (ED) said it will forego its previously announced plan to issue up to $850M of common equity in 2022 and withdraw its equity guidance for 2023 and 2024.

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For European pharmas, poor Q3 performance makes the quarter one to forget (NYSE:GSK)

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Like most of the rest of the stock market, the third quarter is one to forget for major European pharmaceutical companies.

In Q3 2022, the S&P 500 was down ~5%. The SPDR MSCI Europe Health Care UCITS ETF, whose primary listing on Euronext Paris (ticker: STW), fared even worse, down 8% for the quarter. Its top 10 holdings are among the largest European pharmas based on market cap.

Europe’s biggest drug company, Roche (OTCQX:RHHBY)(OTCQX:RHHBF), was also the best pharma performer of the quarter, down only 2%.

A major overhang for the company is the impending launch of generics of one of its best selling drugs, Lucentis (ranibizumab), for age-related macular degeneration. In Q2, Roche (OTCQX:RHHBY) reported US sales of the treatment of CHF 316M ($320.1M), a decline of ~4% from the year-ago period.

On Monday, Coherus BioSciences (CHRS) will launch Cimerli, its biosimilar to Lucentis, in the US. In September, the European Medicines Agency’s recommended approval of Stada’s Ximluci biosimilar in the EU.

Roche is hoping that its follow-in to Lucentis, Vabysmo (faricimab), will blunt some of the blow from Lucentis generics. In Q2, it brought in sales of CHF 109M ($110.4M).

The second best performer of the month was fellow Swiss pharma Novartis (NYSE:NVS), which was down ~9%. While Novartis (NVS) benefitted earlier this year from several US drug approvals — such as Vonjo (pacritinib) and Pluvicto (lutetium Lu 177 vipivotide tetraxetan) — Q3 was much quieter on that front.

In the US in the quarter, the FDA approved a combination of the company’s Tafinlar (dabrafenib) + Mekinist (trametinib) for solid tumors with a certain mutation while in the EU, Scemblix (asciminib) was approved in August for chronic myeloid leukemia.

Novartis (NVS) just hit a 52-week low of $52.10 on Sept. 26. A major lingering concern for the pharma is the potential launch of generics of its blockbuster multiple sclerosis drug, Gilenya (fingolimod). It had 2021 sales of ~$2.8B. On Sept. 29, the US Supreme Court issued a stay on a mandate from an appeals court that would have allowed Gilenya generics.

Just behind Novartis (NVS) was Danish pharma Novo Nordisk (NVO), which was off ~10% in the quarter. A key highlight for the diabetes treatment company was its $1.1B acquisition of Forma Therapeutics (FMTX), which is focused on sickle cell disease.

In September, the company was buoyed by data from a late-stage trial showed that showed once-weekly insulin icodec led to better results compared to its own once-daily Tresiba (insulin degludec).

Novo Nordisk has benefitted immensely since the June 2021 approval of Wegovy (semaglutide) as a weight-loss treatment. In Q2, however, revenue of 1.2B Danish Krone (~$158.2M) compared to 1.4B ($184.5M) in Q1.

Wegovy will also likely soon have competition from Eli Lilly’s Mounjaro (tirzepatide). Although currently only approved for diabetes, Lilly is pursuing approval Mounjaro as a weight-loss treatment. In a head-to-head trial, Mounjaro beat Wegovy in terms of A1C and body weight reductions.

AstraZeneca (NASDAQ:AZN) lost 17% in the quarter. It hit a 52-week low of $52.65 on Sept. 26. The company did have some positive catalysts in the quarter in terms of readouts from several trials looking at expanding indications for several of its oncology treatments. Last month, however, Credit Suisse cut its rating to neutral saying that AstraZeneca’s (AZN) current stock price reflects its oncology potential.

The bottom two large European pharmas, GlaxoSmithKline (NYSE:GSK) and Sanofi (NASDAQ:SNY), lost, respectively, ~18% and ~26% in the quarter. GSK’s (GSK) major event in Q3 was the July spinoff of its consumer healthcare unit into a separately traded company, Haleon (HLN), which is also down significantly since it began trading.

Sanofi (SNY), as well as GSK (GSK) and Haleon (HLN), were also impacted in the quarter by worries over potential legal exposure to lawsuits over the heartburn drug Zantine (ranitidine) and apparent links to unacceptable levels of potential human carcinogen, N-nitrosodimethylamine. The companies have said there is no evidence that Zantac is linked to cancer.

One closely watched European pharma, BioNTech, was down 14% in the quarter. The company, which along with Pfizer (PFE) developed the COVID-19 vaccine Comirnaty, has been dealing with declining sales of the shots.

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