Monday Money Tip: Central banks calling shots for stocks?

You may not agree with what central banks are doing worldwide, but their actions will force stock markets to levitate, says one prominent local money manager.

David Kotok, chairman and chief investment officer at Cumberland Advisors in Vineland, argues that Friday's announcement by the Bank of Japan strongly increasing its quantitative-easing program represents a "massive, bullish shift for many stock markets worldwide. Included in the shift are Japan and its associated markets but also, importantly, the United States," he contends.

"Central banks, the BOJ, are creating money to buy stocks. This is now at a new and higher level than previously. The European Central Bank is trying to figure out how to respond. The U.K. and many Asian countries must now rethink their policies," he adds.

Capital markets will adjust in favor of equities, and his firm has been a buyer of stocks on recent dips.

"When one of the G4 - the U.S., U.K., Japan, Eurozone - central banks launches a policy shift like this, the others are implicitly adjusted. And there are secondary effects," Kotok explains.

In short, Japan is engaging in a currency war, trying to weaken the yen. Other central banks around the world, including in China and Europe, may have no choice but to fight back.

Witness Switzerland's reaction to currency weakness by increasing its central-bank holdings of gold, Kotok notes.

"In the interdependent, financially interconnected world, the G4's actions apply to over 80 percent of worldwide capital markets," he says. "The G4 currencies include the yen, pound, euro, and dollar. One of them has launched a salvo at stimulus in unprecedented proportion. The others must scramble."

As a result, he adds, "we expect stock markets to move higher in the U.S. and elsewhere."

The Pennsylvania Institute of Certified Public Accountants will hold a seminar at Penn State Great Valley in Malvern on Friday, titled "Social Security, Medicare, and Prescription Drug Retirement Benefits: What Every Baby Boomer Needs to Know Now."

Speakers will discuss strategies that dovetail Social Security with other retirement objectives, including maximizing benefits at ages 62, 66, and 70, and coordinating benefits with spouses.

For more information, phone PICPA at 215-496-9272 or visit www.picpa.org.