"If they Hike the Rate, the Fed has moved since the financial crisis from a precise Fed funds rate to a target range and the target range is presently between 0-25 basis points. If they hike to a 25-50 basis point range, they have to withdraw reserves on their Balance Sheet to move that rate up. They now have around $2.5 trillion reserves on their balance sheet and the Fed probably thinks that they can hike the rate by withdrawing maybe 300-400 billion dollars and I don't think that will do it.

I think they will need to drain at least $1 trillion—it could be a lot more than $1 trillion—and what this does is it will be a shrinkage of the Fed's balance sheet and it will also shrink liquidity and this will be quite negative for global liquidity in general. I think this will go into the history books as a major policy mistake. Though I am not an advocate or believer in zero interest rate policies and QE or whatever, I think we should save those policy steps for a deep crisis when the system is in trouble but really not fool around with them when the system is working properly. So I think that is the issue that I have with the market and I am rather bearish for 2016..."

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Felix Zulauf was born 1950, and is the owner and president of Zulauf Asset Management, a Zug, Switzerland-based hedge fund. Felix has worked in the financial markets and asset management for almost 40 years. Mr. Zulauf has been a regular member of the Barron's Roundtable for more than 20 years.