The Dow Jones Industrial Average may be near its record high, but danger lurks within, says Brad Lamensdorf, co-portfolio manager of the Ranger Equity Bear Fund.
One-third of the Dow's 30 stocks have slumped to 52-week lows Since December. "If you had a healthy market, all 30 stocks should be at highs," Lamensdorf tells CNBC
Among the stocks that have hit one-year nadirs in 2015 are Exxon Mobil, Caterpillar, Chevron, American Express, IBM, General Electric, McDonald's, Verizon and AT&T.
Dow stocks that are within 10 percent of their one-year lows include Coca-Cola, Procter & Gamble, Merck and Johnson & Johnson.
This situation contrasts with rampant investor enthusiasm, Lamensdorf notes. "Right now everyone is very, very bullish and that concerns us," he explains, mentioning a Chartcraft study showing that bullish sentiment among 150 market newsletter writers is nearing a 30-year peak.
Meanwhile, Ray Dalio, founder of Bridgewater Associates, the world's largest hedge fund manager, says that when the Federal Reserve finally raises interest rates there could be heck to pay in the stock market,
Indeed, we could see a repeat of 1937, he and colleague Mark Dinner write in a note to investors obtained by the Financial Times
. In that year, the Fed tightened policy prematurely after the crash of 1929. This led to the Dow Jones Industrial Average falling by one-third in 1937 and continuing to decrease in 1938.
"We don't know — nor does the Fed know — exactly how much tightening will knock over the apple cart," the duo note.
"What we do hope the Fed knows, which we don't know, is how exactly it will fix things if it knocks it over. We hope that they know that before they make a move that could knock over the apple cart."
The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008.
"If one agrees that either a) we are near the end of the developed country central bankers' ability to be effective in stimulating money and credit growth or b) the dollar is the world's reserve currency and that the world needs easier rather than tighter money policies, then one would hope that the Fed will be very cautious about tightening."
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