Smarter Money: Head-Fake Alert!

Here we go again. We get good news for Microsoft (MSFT Quote) and all of these second-rate, one-trick-pony tech mutual fund managers (the ones who are down 30%, 40% and 50%) come on television and tell you how rosy things are.

Even though I don't have cable out here, I can tell from the site and from your email that these charlatans are back on the tube, trying to take your hard-earned dollars again. Let's be sure to understand what this Microsoft news, as well as the better-than-expected Yahoo!(YHOO Quote) and Motorola (MOT Quote) news means.

Ever since September of last year, when Intel (INTC Quote) announced things were bad, the game has been to lower expectations to such levels that they can be beaten, with the idea that buyers will then be lulled back into these stocks, regardless of how expensive they are.

We have seen this game played with Nortel(NT Quote), Intel, JDS Uniphase(JDSU Quote), Corning(GLW Quote), Yahoo! and Motorola, as well as Broadcom(BRCM Quote), Applied Micro Circuits (AMCC Quote), PMC-Sierra(PMCS Quote), Ariba(ARBA Quote) and even Exodus (EXDS Quote), as well as a whole host of other techs, including Sun Micro(SUNW Quote) and Cisco(CSCO Quote). The analysts all play along and get all ga-ga when the new numbers come out that beat the severely guided-down projections.

Now it is happening again, courtesy of Microsoft. The whole game is playing out again, with the concomitant rallies in a bunch of junk, from high-end communications chips to fiber-optic plays. That's just nutty, but it keeps happening because these tech mutual funds can't help themselves. Believe me, if I could put a box right here in this column that said, "Click here to transfer your Second Hand fund's remaining assets (after the losses) into an S&P 500 index fund!" -- I would do it! That's how strongly I feel about this move being a head-fake.

But instead, what will happen is that these managers will con you into believing that you are about to miss the bottom, as they have so many other times in the last 18 months.

Don't believe them. This is your chance. I doubt you will get a better one, especially before they start inflicting their gains on you again. Remember last year when you had capital gains but no real gains? This year will be a repeat performance if you don't act now.

Random musings: I notice that Doug Kass has weighed in on this same subject. Take it from me, all of the pros in the business are amazed that the amateurs running these tech funds have the gall to show themselves on television to try to bail themselves out -- before they get canned or shut down, that is. It's amazing and disheartening.