(FORTUNE Magazine) – SPECIAL REPORT/ Cover Stories

26 The Drug Trade Think of it as a huge, multinational commodity business with a fast- moving top management, a widespread distribution network, and price- insensitive customers. by Louis Kraar

39 What to Do About Drugs The U. S. needs a new policy: consistent severity in fighting the hard stuff, more compassion in treating addicts. And perhaps more flexibility toward marijuana. The money and police time freed up by legalizing pot could help pay for a fresh approach. by Andrew Kupfer

MONEY & MARKETS

44 Merrill Lynch: The Stumbling Herd Don Regan, who led the firm in its glory days, wonders how long it will take for his successors to get their act together. Others wonder too. Is Merrill takeover bait? by Brett Duval Fromson

46 Regan on His Old Firm

COMPETITION

54 FORTUNE 500 CEO Poll: Look Out, World, Here We Come America' s big bosses say the U. S. is doing just fine against the international competition. Protectionism? Forget it ! by David Kirkpatrick

58 The U. S. Chipmakers' Shaky Comeback Aided by the mighty yen, they have won an important battle in their war with Japan. Will they seize the lull to rearm? by Gary Hector

66 Japan' s Carmakers Take On the Globe They have solved their yen problems faster than anyone imagined, and could pass the U. S. and Europe by the end of the 1990s. by Alex Taylor III

EXECUTIVE LIFE

78 Cool Cures for Burnout As companies shrink and workloads rise, even the best managers are losing their old pizazz. Prescriptions range from an evening with Chopin to a month in India. by Brian Dumaine

CORPORATE PERFORMANCE

87 Report Card on the Baby Bells Going on five years since AT& T' s breakup, BellSouth gets an A+, Pacific Telesis is most improved, and Nynex isn' t living up to potential. What about the others? by Kate Ballen

96 Companies to Watch

MANAGING

98 Still at Home on the Range But now ranch owners round up cattle with helicopters, and don' t wear spurs. They fly a lot, and spurs set off airport metal detectors. by Alan Farnham

4 The Editor' s Desk

8 News/ Trends Economics and the summit; a costly new health benefit; the Toni Twins hit 40; regulating VDTs; AT& T vs. IBM, DEC, H- P et al.; program trading as hero; and more.

19 Letters to Fortune

107 Books & Ideas An already controversial book about Drexel Burnham and junk- bond king Michael Milken talks tougher than it really is. by Stratford P. Sherman

109 Personal Investing How to spread your wealth around using mutual funds that offer a mixture of ingredients. by Andrew Evan Serwer

Plantronics, the unrung master of hands- off phones; warming up to local gas company stocks.

Portfolio Talk: Scott Black of Delphi Management Inc.

113 Fortune People Elliot Richardson in High Noon at Milbank Tweed; Tom Murphy and Warren Buffett in Loving on ABC; Tom Bodett in Motel 6 Mystery on radio; and more. by Terence P. Pare

114 On the Rise

117 Keeping Up A new hat at Harvard, the emerging case against coffee, private baloney, and other matters. by Daniel Seligman

Cover: Gonzalo Rodriguez Gacha at a horse show on the outskirts of Medellin, Colombia. Photograph by Eric Vandeville- Gamma/ Liaison.