Playing the US cliff like euro survival

A Reuters poll on Friday showed most economists believe an agreement will be reached before the deadline but that partisan bickering beforehand could damage the economy.

It remains our view that a compromise will emerge as neither side wants to be blamed for plunging the economy back into recession, Keith Wade, chief strategist at Schroders said this week. The difficulty is that time is limited. Given what we have seen in the past and in Europe today, politicians will want to take any agreement to the wire.

For long-term investors trying to see through the fog, how do you retain your nerve or conviction about the eventual outcome during weeks of stomach-churning market moves as negotiating positions are relayed via alarming news headlines?

EUROPEAN PLAYBOOK?

This has been the playbook in Europe throughout the euro crisis to date -- a war that's far from over given this week's latest anxiety about Greece, the unresolved issue of a sovereign Spanish bailout and signs of sharp German economic slowdown.

Long-term investors typically had four main options:

1) Avoid the euro zone altogether -- nigh-on impossible for massive euro-based pension and mutual funds if not the biggest global funds

2) Seek safety internally within the bloc's perceived safest havens, such as German debt.

3) Take a medium-term view of the outcome that allows you to you pick up short-term pricing anomalies and wait for overwhelming policy response.

4) Tactically

... contd.