Profit opportunities exist despite 1,000 point drop in market. What Fallen Angel Stock investors must do now to protect their wealth!

IT'S THE ONE WORD THAT CAN MAKE ANY INVESTOR AUTOMATICALLY WINCE.

A word so foul a sound that only a right-brained ECONOMIST could have dreamed it up. A word so perverse that U.S. investors have spent the last 25 years trying to forget it. No, I'm not talking about David Stockman's "trickle-down" theory.

I happen to be talking about a nasty term called "stagflation." That's right: Stagnant economic growth Inflation. You remember that word - last uttered with frequency in the late 1970's - don't you? Well for those of us who don't, let's take a trip down memory lane....

The year is 1978. Unemployment is out of control. Manufactures aren't manufacturing. Oil prices are so high - and a gas shortage so severe - that there are lines around the block in the middle of a hot summer. But that's not all. The real problem is inflation.

And in an effort to fight it, Paul Volcker - the Chairman of the Federal Reserve - has raised interest rates to levels not seen since the Great Depression. Yup, those were some dark days for U.S. equity investors, among other Americans. It it was exactly the fear of a return to the late 70's - when Michael Jackson was still normal - that sent share prices down 9 percent during the past month.

How could the Wall Street "smart money" go FROM thinking the "Goldilocks" economy 6 weeks ago TO chocking on nightmares of Paul Volckers cigar smoke so quickly? In short, it was the "Killer 7."

Confused yet? Let me explain:

Employment, Retail sales, Manufacturing production and Housing starts, were weaker than expected. While Inflation, Interest rates and the twin deficits were larger than expected. The result? A 9 percent decline - and weak bounce back rallies - in stocks.

So what's an equity investor to do? Some argue that it's time to sell all stocks and go into hard assets such as gold and real estate. Those folks need professional help. So do those crazy-eyed long haired freaks that CNBC brings out every time the market gets hammered to tout the benefits of an all gold portfolio.

Turn the channel. Nope, my advice to you is to keep your eyes sharp for the next Fallen Angel Stock. In fact we have our eyes on a company right now. The stock is selling in the low $30 range. But what makes this company so special is not that it's selling for half of what its worth. What makes it so special is that it can raise prices ABOVE the inflation rate.

That's right. And that's important because inflation - the primary reason to be concerned right now - is the only thing you should be thinking about. That's because rumors of the demise of the economy are - as always - greatly exaggerated. Yes, what you should be concerned about is the prospect of inflation.

Why? Because inflation is to an investor what quicksand is to a hiker.

*Inflation makes it more expensive for companies like Intel (SYM: INTC) to build new plants.

*Inflation makes it harder for some companies to pass increases to their customers.

*That means profit declines, which means a decline in stock prices.

But inflation can also be a friend to certain companies. Companies that don't have high capital expenses. Companies that have pricing power. Companies that have brand names. And the retailer I'm describing that's selling in the low $30's has all of the above. And it's selling for .50 cents on the dollar.

So, if you're concerned about what moves you should be making to protect your portfolio here are 3 things you should do right now:

1. If you have ANY credit card debt take out a home equity loan - which is tax deductible - and pay it off while interest rates are still low. They will soon be rising.

2. Don't make that investment into another property just because the last 2 deals you did worked out. When interest rates rise, property values decline - it's that simple.

3. Sell any stocks you own where the company has more than 40 percent of its capital in debt. These are the first companies to take it on the chin when interest rates rise and the economy slows down.

Have a great weekend and remember, you are what you read.