There is a downside to all this recent upside in the market, I’m afraid: The performance pushers are crawling back out of the woodwork, armed with dazzling numbers and whispering of magic.

Despite the choppiness in the stock market over the past week, large cap stocks are still up more than 50% since the market bottom in March, and small stocks have gained north of 70%. That means a money manager who made some well-timed, risky bets earlier in the year could easily be sporting year-to-date investment performance approaching triple digits. Sales reps fairly fall all over themselves when they come across managers that have those kinds of gaudy gains, knowing they can attract droves of assets by just selling the numbers.

Recently, one of my clients forwarded me an email from a broker who was doing just that. He claimed to have found a new money manager who had generated huge returns this year by:

“…focusing on short-term returns from stocks in beaten down sectors by buying the top 8-10 stocks in the sector when a signal is given, then managing the risk by exiting the position in 4 days if not profitable but holding for as long as 5 days if profitable. The year-to-date return is 70%.” 

I love the part about holding for four days if not profitable and as long as five days if profitable. I guess the 24-hour interim is the manager’s idea of “The Long Term.”

I also couldn’t help but notice this “advisor” is a Certified Financial Planner. I wonder what his financial plans looks like for his clients if five days is the long side of his holding period? If you put that kind of trading activity into your financial planning software it would have about the same effect as putting a fork in a wall socket.

It’s been so long since we had a run of big gains in the market – second quarter ’09 was the first positive quarter in two years – that it’s easy to forget the tactics that the performance hawkers use when times are good. It’s always about the numbers, and it’s always a trap. Remember that these are the same folks who were shilling dot.com stocks a decade ago.

The bottom line is that it’s definitely caveat emptor time in the market again…