Macro

Crude oil fell to its lowest levels in over a decade as the Asian financial crisis crushed demand while OPEC and non-OPEC producers kept output high. The collapse squeezed energy company profits and prompted a fresh round of oil-sector mergers. Prices would not begin a sustained recovery until into 1999.

Collapsing Asian demand and a supply glut crushed crude toward $11, a real-terms low that devastated producer cash flows; the December Exxon-Mobil megamerger was a survival response to the bust.

Oil at $11, base metals at multi-year lows

Lockheed Martin abandoned its $11 billion acquisition of Northrop Grumman due to Pentagon and antitrust opposition, preserving market competition in defense. The decision followed government concerns over reduced competition and monopolistic risks in key military technology sectors. The move maintains Lockheed's relationship with the Pentagon but leaves Northrop independent and potentially open to future strategic shifts.

Operation Desert Fox strikes Iraq, munitions use

German automaker Daimler-Benz and US-based Chrysler announced a merger of equals to form DaimlerChrysler, then the largest industrial merger in history and a landmark cross-Atlantic corporate combination. The deal aimed to combine Daimler's luxury engineering with Chrysler's North American scale. Cultural and structural clashes would later undermine the tie-up.

Industrial sector sentiment is modestly positive this month, driven primarily by the announced $36 billion merger between Daimler-Benz and Chrysler, a rare large-scale cross-border consolidation that signals confidence in global industrial integration and operational synergies. While macro uncertainty persists, the deal has buoyed investor optimism around scale and efficiency in heavy manufacturing. The read reflects limited but tangible enthusiasm, concentrated in aerospace and automotive sub-sectors.

Banc One Corporation and First Chicago NBD agreed to a stock merger creating Bank One Corporation, one of the largest US regional bank combinations to date. The deal was part of a broader late-1990s wave of bank consolidation driven by deregulation and scale pressures. It followed closely on the heels of the Citicorp-Travelers announcement.

Russia defaults; Dow drops 512 in a day

Underlying housing stayed strong on low rates, but REIT stocks entered a bear market as capital chased large-cap tech, and the fall credit crunch from Russia's default briefly hit CRE lending before the Fed's emergency cuts.

The Fed's autumn emergency cuts and a flight to safety lifted our shares, while oil's collapse to $11 relieved fuel costs; a good year for defensive yield.

On May 7, 1998, Germany's Daimler-Benz and America's Chrysler unveiled a roughly $36 billion all-stock merger to form DaimlerChrysler, then the largest cross-border industrial combination and the biggest foreign acquisition of a U.S. company on record. Daimler shareholders took about 57% of the combined automaker, which spanned factories in 34 countries and roughly 4.4 million annual vehicle sales. The 'merger of equals' framing later unraveled, and Chrysler was sold off in 2007.

Consumer sector sentiment is neutral to slightly positive this month, primarily shaped by the UAW strike disrupting nearly all of General Motors' North American output. While the strike introduces near-term uncertainty in auto availability and pricing, broader consumer demand has held firm, supporting underlying resilience in the sector. The modest bullish tilt reflects confidence that supply-side pressures will ease without triggering widespread consumer pullback.

Stanford PhD students Larry Page and Sergey Brin incorporated Google to commercialize their PageRank search algorithm, initially operating out of a garage in Menlo Park. The search engine's superior relevance ranking quickly set it apart from existing portals. Google would grow to dominate internet search and become one of the most valuable companies in the world.

capital floods into tech, mania resumes

The U.S. Food and Drug Administration (FDA) has approved Viagra (sildenafil citrate), developed by Pfizer, as the first oral medication for treating erectile dysfunction, a condition affecting millions of men. Clinical trials showed significant efficacy across diverse patient groups, with common side effects including headache and flushing, driving strong market anticipation for the drug's commercial launch.

March's Viagra launch became a cultural and commercial phenomenon for Pfizer, and my franchise thrived in the bull market; the August Russia/LTCM panic barely dented my defensive cash flows.

WorldCom finalized its $37 billion acquisition of MCI Communications following FCC approval, creating telecommunications giant MCI WorldCom. The deal, conditioned on MCI selling its Internet business, aims to enhance competition and expand service offerings across 200+ countries. The merger accelerates bundled telecom services and strengthens WorldCom's position against rivals like AT&T and GTE.

The communication sector is trading slightly bullish this month, supported by WorldCom’s $37 billion acquisition of MCI Communications, a move that signals aggressive consolidation and scale-building among telecom carriers. While broader market conditions remain uncertain, this transformative deal has buoyed investor sentiment within the sector, reflecting confidence in expanded network reach and cost synergies.