Rally Not Over Yet, but Stocks No Bargain: Cooperman

With stocks at all-time highs, the market still has "more to go" on the upside, billionaire hedge fund manager Leon Cooperman told CNBC on Wednesday, but he said equities are fairly valued at these levels and not cheap.

"I see all this excitement. … The last time I saw excitement like this Apple was at $700, Facebook was $38," Cooperman warned in a "Squawk Box" interview. "But I say to myself ... every bull market ends in overvaluation and every bear market ends in undervaluation. So the market is still probably okay."

(Read More: What the Pros Are Saying About the Market's Rally)

"Equities are the best house in the financial asset neighborhood," he continued. "[But] we don't know yet whether it's a good neighborhood or a bad neighborhood."

"Think about the alternatives in financial assets … You can put your money in cash, that's zero and [Federal Reserve Chairman Ben Bernanke] says it's going to stay zero for another year or two," Cooperman said. "You can put it in U.S. government bonds … [but] buying U.S. government bonds today is basically like walking in front of a steamroller and picking up a dime."

The chairman and CEO of Omega Advisors said there are two questions investors need to ask themselves in this don't-fight-the-Fed but watch-Washington environment: "Has [Bernanke] gotten the market into a zone of overvaluation through this zero interest rate policy? Secondly, whose ox is going to be gored when [lawmakers] start dealing with this budget deficit?"

"The market is fairly valued at 1,500 and we're about 1,540 [on the S&P 500]," he said, adding that Bernanke has "gotten the market into a zone of fair valuation."

As for the debt stalemate, "we cannot continuing on policies like we're having," Cooperman implored. "I think the most negative part of the sequester is not its impact on the economy [but] another evidence of the inability of government to get together and the fiscal [side] to work things work." He added, "That's why the entire burden of dealing with this severe recession fell on Bernanke."

While maintaining a cautiously bullish stance, Cooperman said there are two wildcards that could derail the rally: Some sort of trouble in the Mideast or another recession, which he points out, is not forecast.

(Read More: Dow Finishes at All-Time High, Smashes 2007's Record Close)

"Every recession sows the seeds of the next business recovery," he continued. "The next business recovery sows the seeds of the next recession. I think the theme is: [The rally] is not over yet, but nor is the market a bargain."

By CNBC's Matthew J. Belvedere; Follow him on Twitter @Matt_SquawkCNBC