You’re a fund manager and you’re Nortel naked.

Personally, I’d rather be walking a tightrope with one leg tied behind my back than being a fund manager walking the market tightrope without the balance of Nortel Networks.

Nortel (NT-TSX), which just knocked your socks off with knockout financials, is driving you bonkers. Again.

Last time you followed the fund herd and climbed into bed with Nortel, you got burned big time.

You fell out of bed with the stock as it took a three-year nosedive from $124.50 to 67 cents.

Now, Nortel, flying on the back of its $499 million US profit in the fourth quarter of ’03, is back in vogue.

Nortel is like your former lover. You couldn’t live with her and now you can’t live without her. You want to forget, but you can’t get her off your mind.

On your way to work, the Nortel story is being trumpeted on the radio. You switch the radio off.

You get to work and your colleagues are crowded around the set, watching an ROB-TV reporter talk about how Nortel is once again the top-weighted stock on the S&P/TSX composite index, vaulting ahead of Royal Bank (RBC-TSX).

You can’t bear to watch.

You scan the market and you see Nortel is hotter than a Super Bowl half-time show. You see the TSX index is up 72 points for the day and, doing the math, you figure out that without Nortel, it would have been up one measly point.

One analyst’s report is particularly haunting to you. George Notter of San Francisco, an analyst with Deutsche Bank, has headlined a Nortel report: “As hot as Paris Hilton.”

It’s a flashback to 1999 and 2000 when Nortel ruled the Canadian market.

Now you’re seeing the same signs of the market’s hopeless infatuation with Nortel and it’s like having a nightmare replayed before your eyes.

As Nortel, the freight train of Canadian stocks, steams along, you know it is carrying Canada’s benchmark index along with it.

And you know what that means?

The performance of the Canadian equity fund you manage will be compared to the index’s performance.

If your fund that is designed to outperform gets beaten by the boring old index, you know you’re not doing your job, and if you’re not doing your job, you’re not going to have a job.

You know that investors may be stupid, but you figure they may not be stupid enough to pay fees to own your fund when they can own an index fund without paying the tip.

Nortel is a leaner, meaner operation with Frank Dunne at the reins, but you still hate the valuation of the stock.

But then you wonder if valuation matters anymore, as the posse of analysts frantically boosts its target prices in trying to keep up with the stock’s rapid ascent.

On the other hand, Ross Healy, CEO of independent firm Strategic Analysis, is starting to shake his snowy head again over analyst “euphoria” about Nortel.

And wasn’t he one of the first on Bay Street to ring the alarm that Nortel shares were about to fall out of bed when they were trading in the $100 range?

You know that you’re not alone in watching this train from the station (a recent unofficial Financial Edge survey showed that Nortel was a top 10 holding in only 25.2 per cent of Canadian fund companies that manage Canadian large-cap funds).

But what happens, you wonder, if virtually everyone starts climbing aboard thinking they can’t not own Nortel, and the stock returns to its status as the 800-pound gorilla of the index? You don’t even want to think about that scenario.

So what to do?

You do what amateur investors are told never to do.

You chase the stock, buy it late and cross your fingers.

And now you’re sleeping better . . . till next week?

* OILY GOLD GURU: John Embry has been Canada’s superstar guru during the rush to gold stocks in recent years, but now the gold specialist is also pitching oil stocks based on the demand from emerging markets such as China and India.

Embry, president of Sprott Asset Management, recently told MineWeb: “I think we’re getting into a situation where oil is getting in shorter supply. I think what people have misread is the enormous consumption of energy that’s taking place in China and these emerging massive countries with massive population bases.”

Of course, Embry is still pounding the table on gold. “I would be disappointed if (the gold price, recently at $410 US) did not exceed its 1980 high ($875 US) this decade.”

* GENIUSES NEED NOT APPLY? When Ross Healy of Strategic Analysis was asked recently for his take on management at EnCana, he quipped: “Quite frankly, I could care less about management (in senior oil and gas companies). All I want to know is that they keep making money. Right now, it’s pretty hard for management to bugger things up.”

EnCana is Healy’s top oil and gas pick. For his top picks, see Pro’s 3 Stars this week.

* SAGE WORDS: “A drop of honey catches more flies than a gallon of gall.”

– Abraham Lincoln.

HOT STOCK: ENDEAVOUR GOLD
EDR-TSXV $1.61
Up 45 cents (+39.1%) on 847,000 shares (for week ending Feb. 6).
When mining stocks were on fire, Endeavour couldn’t get untracked. Now that mining stocks have been in a severe correction mode, the Vancouver mining play has been setting a torrid pace, galloping into the headwind of a selloff in mining microcaps. Endeavour recently purchased the Santa Cruz producing gold/silver mine in Mexico.

COLD STOCK:MAXY GOLD CORP.
MXD-TSXV $1.38
Down 37 cents (-21.1%) on 369,800 shares (for week ending Feb. 6).
Maxy has been one of the many mining 10-baggers of the past year on a rejuvenated Venture exchange, having had a phenomenal run on its Chinese prospects. So no wonder investors were booking some profits in Maxy and numerous other speculative mining plays.