No, we haven’t suddenly become avid avian enthusiasts and yes, last time we checked we were still a finance blog. Just to put things in perspective, a Black Swan is an event or circumstance that is almost impossible to predict since it is a wild deviation from the norm. Spotting these occurrences is not really a reasonable expectation, and while the Wall Street Journal (WSJ) had an article recently on how to profit from this possibility but it’s a terrible thing to suggest to a lay-person or even most professionals for that matter.
The whole point of the discussion was to point out how you could stand to benefit if the market declined again, but it is worth noting that market regression on a large scale does not happen very often and we’ve already seen this happen twice in a decade. That doesn’t exclude the possible of a third sucker punch being delivered to the markets, but would you really want to bet on a lousy decade becoming still lousier? The WSJ certainly opines you should and there are several other funds that are now around just to exploit these risk scenarios (check out Universa Investments; hedge fund 
investors like these are aplenty). But extremes such as those precipitated by a Black Swan don’t really pop up a whole lot in asset prices every quarter or every year, and even if your Black Swan does pop up after several quarters you might or might not cover your losses. It is all entirely speculative.
Just as there is no real way to protect yourself from the emergence of the Black Swan (and don’t let anyone tell you they can), there is also no real way to know for sure if you will profit. For everything you stand to lose on premium payments, there is no way of knowing for sure about how big the payoff will be in the face of a risky event popping up. Realise that the WSJ is asking you to put your money and make your money off something you cannot fully predict or understand. The prudent option is not to ride this killer wave but protect yourself from getting into a world of hurt.
Most market problems crop up unexpectedly but also fade away just as quickly and it shouldn’t scare you more than it should. For everyone that did get burnt in the stock markets when the market contracted, there were those that pulled out in time since there were months over which the crisis fully played out. Some can confidently play Black Swans in their favor, but the average Joe will spend too much on something that might never happen. Don’t let that guy be you unless you have more money than common sense on hand.
