I am late to comment on this, but what a great tale and what an amazing phenomenon! The northern channel islands you saw as inverted were about 55 to 60 nM (or more) away from your location. My wife and I once observed, from anchorage at Anacapa Island, another island almost due south. We had never seen it before in dozens of visits there. It shimmered a bit above the ocean surface. It was not inverted or particularly squared off. We thought that the way it seemed to slightly float above the water was just an artefact of ocean mist obscuring the bottom of the island mountains. We joked that, "Hollywood must have towed a floating island out there for some film shoot!" After reading your tale and consulting the chart, I am pretty sure that our vision was a mirage image of San Nicolas Island, of the story the Island of the Blue Dolphin. I think it is about 25-30 nM distant from Anacapa. Our view did not rise to the quality of Fata Morgana, but was, I think, a mirage. So the moral is, out on the water, keep your eyes open! You never know what you might see!
Also, put yourself in the shoes of a common seaman in the 16th, 17th, 18th or 19th centuries. They spent weeks and weeks of bobbing below decks in the dark at night, then staring for hours on watch at the endless sea, then they saw this........OMG. Is it the Flying Dutchman?
Is it any wonder that superstition and fear of the unknown ran rampant among those crews?
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