I tend to agree with MaryCas.

It makes little sense to compliment someone's intelligence for making fatal mistake.

Maybe the "smart move" would have been to realize that Vito was advising Michael and he, even in his dotage, would not have allowed Michael to make so many (apparently) stupid moves. Or to trust Michael when he assures them that there are things being negotiated that will solve all their problems and answer all their questions. Or to realize that Michael - a war hero who had successfully outfought Sollozzo - could not suddenly become so weak and stupid.

I think that's just a silly line the script gave to Michael.

There's another one soon after: "that little farce you played with my sister - you think that could fool a Corleone?" It obviously fooled one Corleone.