How do you spell Democrat? I-n-f-l-a-t-i-o-n

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I've been following the election closely for two years. For the most part, politics is a hobby of mine, but in this year's election my interest went much deeper.

I recognized very early that the 2008 vote would be monumental on so many levels and investment opportunities would abound. I even outlined the impact of the policies of each candidate on the market in an election gallery.

Now that the results are in with the Democrats taking significant control of the executive and legislative branches, I want to drill down and explore one investment idea that I believe will ascend above all the rest.

One common theme with all Democrats is that spending is sure to increase. Democrats are firmly in the Keynesian camp of using government spending to solve economic problems. We will see large government expenditures in the short term from the new administration.

Can anyone say "inflation"?

So much of the market is focused on deflation with current valuations based on the expectation of deflating prices. While it's true that the economy is slowing, I am more concerned about inflation.

Now, with a Democrat in the White House, I am convinced that the way to make money in the market is to bet on inflation. Vast sums of dollars will be printed and distributed into the economy to stabilize it. Doing so will weaken the U.S. dollar, increase interest rates and create inflationary conditions.

Front and center with inflation will be two commodity trades: gold and oil. I am not a believer in gold, so I'll stick to the oil trade. If you want to make money in the early stages of the new administration, I suggest you position your portfolio to profit from higher oil prices. That means owning oil stocks, and there are several names to consider:

I am a huge fan of Chesapeake Energy (NYSE: CHK), Diamond Offshore Drilling (NYSE: DO), Transocean Inc. (NYSE: RIG) and Devon Energy (NYSE: DVN).

All of these names will benefit as oil prices recover from their recent collapse.

If you are uncomfortable owning individual names, you can invest in the oil sector by investing in exchange-traded funds (ETFs) like the ProShares Ultra Oil and Gas ETF (AMEX: DIG).

DIG is constructed to correspond with twice the daily performance of the Dow Jones U.S. Oil and Gas Index. The fund uses leverage and other techniques to achieve its objective. Investing in the fund entails a high degree of risk and is not for everyone.

The election was truly historic for many reasons, but I am mostly interested in the market ramifications of the new administration. The highest degree of certainty I have at the moment is that inflation is likely to return in a major way.

As such, investing in oil is the single best way to profit from the results of the election.

Jamie Dlugosch is a contributor to InvestorPlace.com.

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Last updated: February 10, 2010: 09:08 AM

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