I went looking for the actual sausage factory quotation from Otto von Bismarck, but apparently he was not the person who originally said it, and even the misattributed versions don’t say exactly what I want to say. So let’s take a big step down from Otto to the Urban Dictionary for a definition of a sausage factory.

“An unpleasant process, especially one that is hidden from public view, that is used to produce a widely consumed product: lots of people like sausage, but few would enjoy watching leftover animal parts ground up to make it.”

This is the theme of the news today. The ultimate goal, of course, is fiscal stability and economic recovery, but getting there is proving to be tough. Government is getting hit in many ways. From the Wall Street Journal (WSJ), we have “Post Office Might Miss Retirees’ Payment” on page A2 and “House Votes to Require Detailing of Budget Cuts,” while the New York Times (NYT) has “Years of Unraveling, Then Bankruptcy for a City” on the front page, as well as “South Carolina Governor’s Budget Ax is Blunted by Legislature,” “Detroit Mayor Confirms Cuts to Workers’ Pay and Benefits,” and “Maine Debate Hints at Rift on Medicaid After Ruling.” These headlines concern all levels of government—federal, state, and municipal—and both major parties, as well as both spending increases and spending cuts. The one theme is that limitations on available resources are now hitting.

Businesses are facing the same types of constraints. Some are facing them more or less voluntarily, as in “Big Banks Prepare Another Round of Cuts” from C1 in the NYT, and some involuntarily, as in “Four Banks Targeted in Euribor Probe” from page 1 of the Financial Times (FT) and “In Its First Action, Consumer Bureau Takes Aim at Capital One” from page B1 of the WSJ. Some are starting to fight against particular problems—see “Utilities Fear Approach of Fiscal Cliff” from page 5 of the FT, which describes how utilities and other dividend-paying companies are planning to fight the pending increase in dividend taxes from 15 percent to more than 43 percent.

Finally, individuals are facing the same problems, both at high levels, as in “Economic Fears Hurting Obama, Poll Indicates” from the front page of the NYT,and at middle class levels, as in “Uncomfortable Accounting: Retirees Wrestle with a Pension Buyout from GM.”

In the absence of breaking news, the consistent story here is that choices are being made across the board about how to raise more and spend less, and it isn’t pretty. But the factory has to keep rolling, so expect to see a lot more of this going forward.

I have mentioned a couple of times in the past few days that I think regulators and banks will be scrambling to deal with the LIBOR scandal. Said scramble seems to have started.

After a tough weekend and Monday for finance, we have a slow day. There are no articles of particularly new financial or economic interest on any of the front pages—nice to see that for a change.

There are a couple of themes though. In the business section of the New York Times (NYT), three articles highlight conflicts between regulators and financial companies. On the front page are “British Bank Fighting Bid for Data in Rate Case,” which is about the LIBOR scandal, and “Regulators and HSBC Are Faulted by Senate,” which discusses the money laundering scandal. On page 3 is “U. S. Consumer Bureau to Oversee Companies That Handle Credit Reports.” On page C1 of the Wall Street Journal (WSJ), you’ll see “Senate Probe Faults HSBC” and “Banker Accounts on LIBOR Conflict.” And on its front page, the Financial Times (FT) has “Regulator hits out at Diamond over Libor”—but that’s not really new.

For both the weekend and this morning, the headlines are uniformly anti-financial. Let’s take a look at the front pages:

Financial Times

A couple of days ago, at the end of a post on reasons for optimism regarding the economy, I promised that the following day we would discuss what could go wrong. And of course, something did go wrong—I didn’t discuss it. In any event, Friday the 13th just seemed like the right time to discuss the downside—so here we are.

Uncertainty continues

It’s Friday the 13th, widely considered a bad-luck day, and if the Financial Times (FT) lead—which states that banks face a $22 billion bill for LIBOR-related misdeeds—is correct, it certainly is bad luck for them. U.S. regulators are trying to get their side of the LIBOR story out, with reports in the business section of the New York Times (NYT) and on page C3 of the Wall Street Journal (WSJ) that Tim Geithner, then-president of the New York Fed, is said to have noted problems with the LIBOR rate-setting process and attempted to correct them. Apparently, the problems were not corrected, as we are finding out, but the Fed wants us to know that at least Geithner tried. The story just keeps getting more interesting by the day.

Other than that, economic reporting is actually rather upbeat for a change. Page 1 of the NYT reports that economists see signs of a pick-up. Not a fast pick-up, as the article notes, but renewed growth in the second half of the year. On page 4 of the FT, an optimistic take on China’s growth is reported, and on page 3, Ireland seems to be on track with its bailout requirements. Finally, the first page of the NYT business section reports that California municipal bankruptcies are not seen as a trend, despite three in the past couple of weeks. Good to know.

Another day without front-page crisis news—a good thing. The New York Times (NYT) did not have any economic or financial articles of note in the front section, while the lead articles in the Wall Street Journal (WSJ) had the Fed weighing more stimulus—old news. The Financial Times (FT) noted the yield record for U.S. Treasury sales—1.459 percent for the 10-year, the lowest ever. Kind of surprising this did not make either the WSJ or NYT.

The economic slowdown implied by record-low U.S. Treasury yields was consistent with the stories deeper in the papers. The NYT led the business section with the pending year-end fiscal cliff and the effect on the economy of related business uncertainty; reported to have gone up by more than half since April, business uncertainty could knock up to 0.5 percent off of growth this year. The effect of the disquiet over the lifting of the debt ceiling last year was given as an example of how uncertainty can postpone business decisions, including hiring. The NYT also had an article on how the Fed is divided over additional stimulus, creating even more uncertainty.

This post will be a bit different—I am writing it on the road, so I don’t have access to many of my usual resources and tools. I am therefore going to take the chance to talk about something nonquantitative that I find helpful in both an investment and a noninvestment context.

One of the significant perks of my position at Commonwealth is the ability to talk with a wide range of experts in a wide range of fields. A couple of years ago, at our Chairman’s Retreat, we had a speaker who was an expert in the field of happiness.

Looking at the headlines, again it’s more evolution than revolution, continuing with ongoing themes. Spain continues to be a topic of interest, with the Wall Street Journal (WSJ) running an article on page A7 about how Spain will have to cede bank control to European regulators. The Financial Times has a front-page article on how Spain is stepping up austerity, while the New York Times (NYT) has an article in the business section on how, now that Spain has negotiated easier terms, it must meet them.

The LIBOR rigging scandal remains a hot topic, with a shift in focus. Where earlier discussion was on what happened and who was to blame, now the articles focus on who will be paying for it. The NYT has a front-page article on how the scandal has instigated a scramble for damages, and the WSJ has an article on page C2 about U.S. lawmakers joining the LIBOR probe. This will be a much bigger topic in days to come, as it has been described as banking’s “tobacco moment,” with prospective liabilities that could go into the billions.

We talked yesterday about housing. We discussed how it is bottoming, how it is poised—at some point—to start a recovery, and how that is a very good thing for the economy. It’s good for several reasons—largely because of the employment the sector generates and the multiplier effects it has on other areas of the economy.

Housing can be considered a durable good. Because it is a long-term asset that is purchased with financing, it reflects, to some extent, the buyer’s vision of the future. The stabilization and incipient improvement of this sector is also a sign that the U.S. population has started to recover psychologically from the crisis, which is an underappreciated element of what has to happen before recovery really kicks in.