While some investors say stocks are starting to get frothy as they hover near record highs, Ron Baron, CEO of Baron Capital, begs to differ.

Some bears focus on the fact that the Standard & Poor's 500 Index already has jumped 165 percent from its March 2009 low.

But, "from 1999 to now, company earnings have about doubled, and the stock market is up [only] 20 or 30 percent," Baron tells CNBC.

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

"From 2007, it's up maybe 10 percent. People say how much it's up, but it's only up from where it crashed."

Valuations are quite reasonable, Baron explains. When the Internet stock bubble peaked in 1999, the market's price-earnings ratio totaled about 33, and now it's about 14, he says.

"They're cheap on stock valuations alone."

As for the Federal Reserve, it's between a rock and a hard place when it comes to interest rates.

"The economy has too much leverage," he argues. And that would seem to imply that the Fed should raise rates.

But if the Fed hikes rates now, "it would be a big penalty to growth and the economy," Baron adds.

If the economy strengthens, it can handle a tapering of the Federal Reserve's bond buying, experts say.

"The first part of the equation for the Fed to taper is data showing the economy is getting better," Eric Kuby, chief investment officer at North Star Investment Management, tells Reuters.

"If companies are doing well and business is good, you don't need to have zero percent short-term money in order for the stock market to do well."

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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