Central Banks Gone Wild: What Can Investors Do?

Long-Term Secular Bull Market?

Dissecting investors' latest behavior, money printing, the debasing of the Japanese yen, and how it impacts market opportunity, with Jim Rogers, author of "Street Smarts"; BobDoll, Nuveen Investments; and Zane Brown, Lord Abbett.

Advisors will need to discern "the market's forecast of the then-impact of the then-policy announcement, which will finally show up in a change in interest rates for the central banks. Not one of us in this room has that answer," he said.

The goal, he said half-facetiously, is "to stay invested broadly in the market" and then be sure "to exit the day before the interest rate change."

(Read More: Bears on the Brink: 'I Can't Fight It Anymore')

Of course, that's not what will happen in the market when central banks do pull back ? which Kotok said might not happen for five years, a time during which he said the S&P 500 conceivably could surge to 2,500, a 65 percent rise from current levels.

"The world is riskier the longer and longer it goes on," said Scott Mather, managing director and head of global portfolio management at bond giant Pimco. "Periods of calm will be interrupted by periods of roiling prices. You can't make the case that we're on a stable trajectory."

Nonsense, said well-known hedge fund manager Dennis Gartman, whose daily Gartman Letter is among the most widely read morning missives around Wall Street. Central banks, he said, have always been active in the markets.

"The world's always been this way," he said. "I don't think there's any more risk or any less risk than there ever was."

"Is there less debt?" Pimco's Mather asked.

"So what?" Gartman retorted. "What does the level of debt have to do with it?"

Gartman's assessment, though, was disputed.

Nick Colas, chief market strategist at ConvergEx and a widely read morning newsletter author in his own right, was asked to break a logjam on the panel over the importance of debt.

"The deciding vote agrees that there is always risk. The deciding vote also says that when the Fed owns 40 percent of the yield curve it's uncharted territory," Colas said. "To stick your head in the sand and say that it is not a problem is naive."

The mission, then, is to decide how much risk the market truly holds and what investors can do to hedge against the fallout.

For Mather, the best approach is to "get away from the mindset of the home bias" and invest in countries that have less activist central banks and thus more predictable markets.

(Read More: Goldman Sachs Downgrades Global Stocks as Rally Stalls)

Kotok has stuck with a long-running favor towards municipal bonds, while Gartman also holds to a central bank hedging strategy he often has espoused in his newsletter ? buying gold, but with currencies other than the U.S. dollar.

Of the group, Colas was the most vanilla, recommending investors hold plenty of large-cap U.S. stocks for stability in an unstable world.

Investors also should try to find noncorrelated assets, such as precious metals that don't move in unison with stocks, he said. Correlation has heightened with increased central bank intervention.

"Correlations are still sky high," Colas said. "It simply means that when things go up and things go down you feel the pain in every piece of the portfolio."

?By CNBC.com's Jeff Cox; Follow him on Twitter at @JeffCoxCNBCcom.

Source: http://www.cnbc.com/id/100450668

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