JANUARY/FEBRUARY A bullish, merger-happy financial year kicks off with the Dow average right around 1,200.
Energy prices are falling. Natural gas is decontrolled as of Jan. 1. and a supply ``bubble'' persists. The spot market price of oil is sliding; in some US locales, gasoline drops below 90 cents a gallon. OPEC cuts its official price to $28 a barrel Jan 30.
Internationally, the dollar remains strong. In late January, British interest rates rise to their highest level in three years, and British unemployment is at its highest since World War II. In a prelude to the '86 ``big bang,'' Citicorp buys Seccombe, Marshall & Champion PLC, becoming the first bank to own a British discount house.
Bank of Boston Feb. 7 says it failed to report $1.2 billion in cash transactions. Dozens of banks around the US subsequently admit similar faults as the US Treasury cracks down on money laundering. MARCH/APRIL
Privately insured US thrifts are in trouble. ESM, a government securities firm, collapses March 4. That prompts a run on Home State Savings in Ohio and a bank holiday March 15 for 72 savings and loans. Bevill, Bresler & Schulman, another government securities firm, collapses April 8 due to problems with ``repurchase agreements.''
Media takeovers ensue. Capital Cities Communications buys ABC on March 18 for $3.5 billion. Rupert Murdoch buys 50 percent of 20th Century Fox, and then on May 6 Fox buys six TV stations from Metromedia Inc. In mid-April, Ted Turner begins attempt to control CBS; it is unsuccessful, but it costs CBS millions to defend itself.
Internationally, the US on March 1 says it will not ask Japan to extend voluntary auto export quotas. In late March, Japan sets a new, 25 percent higher car export ceiling. But Japan denationalizes telecommunications and plans to liberalize markets.
Yearlong British coal strike ends March 3, after most workers had drifted back. The US and Israel announce elimination of all tariffs within 10 years.
Marketing twists. IBM scraps the PCjr March 19. Coke announces a change in its 99-year-old formula. Procter & Gamble drops its maligned moon-and-stars logo. Pan Am sells its Pacific routes. MAY/JUNE
Salvos in the merger wars. A Delaware court May 17 says raider T. Boone Pickens can be excluded from a Unocal stock buyback. Allied Corporation and the Signal Companies unveil a $5 billion merger on May 15. Uniroyal embarks on a leveraged-buyout. R.J. Reynolds June 2 pays $4.9 billion for Nabisco. And in a $5 billion deal, GM buys Hughes Aircraft.
E.F. Hutton May 2 pleads guilty to federal charges stemming from a systematic check overdrafting scheme affecting some 400 banks and institutions.
With economy sluggish, the Fed on May 17 cuts the discount rate to 7.5 percent. The Dow responds, breaking 1,300 for the first time on May 20.
More problems with privately insured thrifts. Depositors May 9 stage a run on Maryland savings and loans. Eventually, it appears, all thrifts in the US will be federally insured to bolster confidence.
An insurance crisis becomes evident. Doctors, day-care centers, municipalities, and businesses experience soaring rates and policy cancellations. Lloyds of London investors learn May 13 they have lost $165 million due both to misappropriation of funds and underwriting losses in asbestos and medical malpractice in the US.
The US Equal Employment Opportunity Commission June 17 rejects ``comparable worth.'' JULY/AUGUST
Toyota announces July 23 it will produce cars at a wholly owned plant in US (Georgetown, Ky., is the site later chosen). On July 29, General Motors selects Spring Hill, Tenn., for its $3.5 billion ``Saturn'' venture.
Corporate problems. Exxon July 1 is ordered to pay $1.9 billion from gasoline overcharges to state governments for energy conservation. BankAmerica, No. 2 in the US, announces a huge $338 million loss for the second quarter. Manville Corporation establishes a $2.5 billion trust for payment of asbestos victims. On Aug. 11, Union Carbide's Institute, W.Va., plant has gas leak. A.H. Robins files for bankruptcy due to suits over the Dalkon Shield. And bowing to consumer protests, Coca-Cola reintro duces its old formula on July 10 as ``Coke Classic.''
More megadeals: Baxter Travenol buys American Hospital Supply July 15 for $3.8 billion. Monsanto agrees to buy Searle, maker of NutraSweet. Raider Carl Ichan Aug. 23 gains control of TWA.
Financing on US autos drops as low at 7.7 percent, and auto buying surges. SEPTEMBER/OCTOBER
Financial crises at home and abroad. Due to continued unrest in South Africa, US banks refuse to roll over loans. South Africa then freezes loan repayments for four months. In the US, the Farm Credit System needs ``multibillions'' to stay solvent, the system's governor says Sept. 5. A brief strike by autoworkers against Chrysler occurs in early October.
In a move that should result in lower oil prices, Saudi Arabia Sept. 15 says it will sell oil under a ``netback'' arrangement. Another commodity, tin, drops in value as efforts to fix the price fail. Other metals fall, too.
Financial czars from the Group of Five (US, Britain, Japan, West Germany, France) agree Sept. 22 to try to lower the value of the dollar relative to other currencies, especially the yen. After a slow decline throughout the first three quarters of '85, the dollar begins a major drop. In another radical move, Treasury Secretary James A. Baker III Oct. 8 details a $29 billion initiative to help debtor nations.
Giants diversify.Phillip Morris says Sept. 27 it is buying General Foods for $5.8 billion. In Germany, Daimler-Benz announces Oct. 14 it is acquiring 50 percent of AEG, thus making Daimler the largest industrial concern in Germany. On Oct. 30, US Steel, which already owns Marathon Oil, says it is swapping $3.6 billion in stock for Texas Oil & Gas. In mid-October, Kohlberg, Kravis, Roberts acquires Beatrice for $6.2 billion. NOVEMBER/DECEMBER
A big runup in the US stock market. After an up-and-down summer, the Dow shoots past 1,400 on Nov. 6, and just over one month later, on Dec. 11, it crosses 1,500 -- the fastest charging bull market ever. Some credit goes to the Gramm-Rudman bill, signed Dec. 12, and the G-5 agreement.
Internationally, in a high-tech initiative, European ministers approve 10 projects Nov. 6 under the ``Eureka'' program. Like London, meanwhile, the Netherlands plans to deregulate capital markets. The Singapore Stock Exchange halts trading Dec. 2-4 due to the collapse of Pan-Electric Industries.
Although oil prices rose during the fall due to inventory restocking, OPEC decides Dec. 8 to defend its market share. Oil prices begin to fall as a result.
Signs of displeasure with merger mania. Delaware upholds the ``poison pill'' takeover defense. A Houston jury Nov. 19 agrees Texaco acted wrongly in wresting Getty Oil away from Pennzoil and awards an astounding $10.53 billion. (The foes later begin negotiations). The Fed says it wants to limit the use of ``junk bonds'' in mergers. New York governor signs a bill giving New York firms defenses against takeovers.
But the mania continues. GAF mounts a raid on troubled Union Carbide. General Electric Dec. 12 announces acquisition of RCA for $6.3 billion. Time Inc. and partners buy Group W cable-TV from Westinghouse.
The mania even spreads abroad: General Electric of Britain wants Plessey. And like Reynolds-Nabisco, Britain's Imperial Group merges with United Biscuits.
Christmas retailing is good but not great. Automakers announce more cut-rate financing.