With stocks sitting near record highs, one Wall Street veteran is sounding the alarm.
"There are signs of speculation out there, and that makes me worried," said Blackstone Advisory Partners Vice Chairman Byron Wien.
Wien has maintained a cautious tone all year, warning that the market would be dragged down in second half of 2013 by disappointing earnings. But the idea of a frothy market is something new for the strategist, and he blames investors as well as the Federal Reserve's easy money stance.
"Right now investors think monetary policy will remain accommodative indefinitely," Wien said. "When you have a feeling you can't get into trouble, you're likely to take some chances you won't already take."
Wein added: "The feeling is that we're OK for a while and everyone thinks they're smart enough to know when the music is going to stop."
It was just a month ago when the Fed largely surprised the consensus on Wall Street by not beginning to taper its monthly purchase of $85 billion in bonds. Investors cheered the news, and since then stocks have rallied another 3 percent, bringing the S&P 500 to fresh all-time highs.
In addition to sentiment, Wien points to another warning sign: the recent spike in a type of investor borrowing known as margin debt.
(Read more: Investors pile on debt to buy stock at record highs)
New numbers released this week by NYSE Euronext revealed margin debt jumped to a record-high $401 billion.
While Wien thinks valuations mean the market will continue to move higher, he is far from bullish. He told investors in his October commentary: "I have learned over the years that it is a good idea to be at least somewhat defensive when most others think almost everything is headed in the right direction."