My friend Bob Jergovic, chief investment officer for CLS Investment Firm, sent me an interesting piece of information. He quoted from a 2007 book by Nassim Nicholas Taleb, a professor of finance and a former Wall Street trader. The book is entitled “The Black Swan: The Impact of the Highly Improbable.”

The term “black swan” comes from an ancient western concept that all swans are white. In that context, a black swan was used as a metaphor for something that could not exist. It was the 17th century discovery of black swans in Australia that altered the term “black swan” to mean a perceived impossibility that actually comes to pass.

A good example of a “black swan” event is the Sept. 11, 2001, terrorist attack. You may think of others like the bombing of Pearl Harbor, the Oakland fires, or the 1906 San Francisco earthquake.

These events were unimaginable. They had a far-reaching impact on the world. They changed lives forever.

As I was thinking about this “black swan” concept, I got to thinking there are “black swan” events in individual lives, in families and neighborhoods. These may include events like the sudden death of a loved one, a catastrophic health problem, a fire or a major unforeseen financial loss.

The current stock market debacle qualifies as a “black swan” event. If you had asked a hundred financial analysts at the beginning of the year if they could see the steep decline in the market indexes, none would have said yes. It is unprecedented. That word, unprecedented, has been used a lot lately by financial commentators. It is unprecedented. It has never happened before. It is not possible, but it happened.

There is an index called the CBOE Volatility index, commonly referred to as the “fear index.”

The “fear index” is currently sky high. Investors are stymied. They just don’t know what to do or whom to trust.

Jergovic said, “The fear and panic that has gone through the markets since September as the credit markets seized up has created many opportunities for long-term investors. These opportunities are rarely seen in the U. S. markets. Ironically, this is also the time when many investors are heading for the hills”

The emphasis on the phrase “long-term” is essential.

Just a few short months ago, many consumers thought that when gasoline hit $4.50 a gallon we would soon see $5 gas. This was a “black swan” event, but where are we now? We are at $2 and we may see $1.50 a gallon soon. The lesson we can learn from gasoline prices may apply to the stock market. It is not going to be this bad forever. We get through problems. We survive. We adjust. We make do.

Think about those personal “black swan” events. You made it through each of them and you will make it through this one. It does not eliminate the pain of seeing our accounts plummet, but it won’t stay this way for ever.

Remember the past? Things have looked pretty bleak from time to time, but they got better.

Notable Quote: “Industry pays debts, while despair increases them.” — Benjamin Franklin

Tom Mills can be reached at 1030 Seminary St. Suite D, Napa CA 94559, 254-0155, fax 254-0158 or e-mail suntrm@aol.com