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One of this autumn's biggest news headlines will be the result of the U.S. presidential election, as it will have a profound impact on that nation and the world because the two candidates and their respective political parties have totally different philosophies about how to run the U.S. economy and many other important issues.

Personally, I am feeling rather neutral about this election. Nevertheless, its result will have significant economic and stock market implications, so as an investor I am preparing myself to take the most advantage of the possible outcomes.

The current polls show that President Barack Obama is maintaining his slight lead in the race. Thus, at this moment, I am more concerned about my investments in the scenario where the incumbent wins. If he does, I cannot get myself to ignore the two big topics in my mind: "accommodative monetary policy" and "higher energy costs." Now, don't get me wrong-I don't think Mr. Mitt Romney will have the guts or resources to significantly tighten the monetary supply or lower oil prices, but it seems to me that President Obama is even more inclined to urge federal research to further increase monetary supplies (i.e., the next round of quantitative easing) in order to relieve the middle and lower classes' pain at a time of still-high unemployment. Doing so will inevitably devaluate the U.S. dollar and push up oil prices.

I have been closely monitoring the 10- and 30-year bond yields and I am prepared to pull the buy trigger on ProShares UltraShort Lehman 20+ ETF (TBT) or Direxion Daily 30-Yr Treasury Bond ETF (TMV) should an Obama victory become apparent. However, I am glad that I haven't done so yet since my last article on treasury yields because my gut feeling at that time was that more troubles loomed in European sovereign debts. That feeling has proven correct, however, everything has a limit. With the 10-year Treasury yield at only 1.7% and the 30-year Treasury yield at only 2.8%, it is almost time to say, "Enough is enough!"

Now, turning my attention to energy, if Obama wins, some people may once again become excited about alternative energies, which Obama and the Democrats have been advocating hard for several years. My opinion is that alternative energy companies' stocks might get a short-term boost from Obama's victory, but I, for one, am not bullish on these companies' midterm prospects and I am not confident about their ability to post sustainable profits and stable growth over the next five to 10 years. I have seen enough evidence that few technologies and solutions for alternative energies are mature enough to have widespread adoption and cost-effective applications. Thus, my money will still be on traditional energies, most noticeably on crude oil, gasoline, and diesel.

Table 1 lists some major oil companies in the world that cover wholesale/distribution levels of the oil supply chain. Companies in the same nation are ordered alphabetically by name. Why am I only interested in oil companies that engage in wholesaling and distributing and not just exploring and refining? As I explained in my previous article, oil exploration and refining are very risky prospects. For a company involved only in oil exploration or refining, the financial impact from just one bad accident at a major exploration or refining site can bankrupt the company. This level of business risk is too high for me as an investor to accept.

Table 1: Selected Oil Companies Worldwide

Nation

Company

Description

P/E

Current Stock Price ($)

Analysts' Target ($)

USA

Kinder Morgan Energy (KMP)

Super-size oil wholesaler and distributor of the U.S.

N/A

81.9

87.67

Enbridge Energy Partners (EEP)

Super-size oil wholesaler and distributor of the U.S.

17.89

29.56

32.93

Enterprise Products Partners (EPD)

Super-size oil wholesaler and distributor of the U.S.

19.3

53

58.24

Chevron (CVX)

Super-size oil explorer, refiner, and distributor of the U.S.

8.35

112.15

120.91

ConocoPhillips (COP)

Super-size oil explorer, refiner, and distributor of the U.S.

6.62

56.68

62.09

Exxon Mobil (XOM)

Super-size oil explorer, refiner, and distributor of the U.S.

9.24

87.73

90.76

Valero Energy (VLO)

Large-size oil explorer, refiner, and distributor of the U.S.

10.03

29.55

36.04

China

CNOOC (CEO)

Super-size oil explorer, refiner, and distributor of China

7.78

192.17

233.92

Longwei Petroleum (LPH)

Mid-size oil wholesaler and distributor of China

2.03

1.38

6.00

China Petroleum & Chemical (SNP)

Super-size oil explorer, refiner, and distributor of China

8.23

94.67

103.38

PetroChina (PTR)

Super-size oil explorer, refiner, and distributor of China

10.71

124.28

153.09

India

Indian Oil (IOC.NS)

Super-size oil refiner, distributor, and retailer of India

N/A

256.05

311.40

Brazil

Petroleo Brasileiro (PBR)

Super-size oil explorer, refiner, and distributor of Brazil

15.11

22.12

32.59

Holland

Royal Dutch Shell (RDS-A)

Super-size oil explorer, refiner, and distributor of Netherlands

8.39

70.49

N/A

France

Total SA (FP.PA)

Super-size oil explorer, refiner, and distributor of France

8.29

39.81

49.27

United Kingdom

BP plc (BP)

Super-size oil explorer, refiner, and distributor of United Kingdom

7.92

42.64

49.27

Note: All numbers are from Yahoo Finance as of market close on 8/22/2012.

The first group-oil companies in the U.S.-will likely benefit the most from increasing the monetary supply and rising oil prices in the U.S. and around the world. Although the first three companies-KMP, EEP, and EPD-have a more stable margin and face less business risk, their shares are more expensive than those of CVX, COP, COM, and VLO, which have a big portion of their businesses in oil exploration and refining. In this sense, the risks probably trade reasonably with the rewards among these seven companies.

Chinese oil companies are the second group of likely beneficiaries. Because these companies' revenues are denominated in yuan, a rising yuan will result in higher revenue and profit when the companies' input costs stay roughly the same in terms of currency (i.e., the rising value of the yuan will roughly offset the rising crude prices in U.S. dollars). In addition, most Chinese economists expect the government to announce stronger economic stimulus measures to boost domestic consumption in the second half of the year. When that happens, the gasoline and diesel sales volumes and prices will rise quickly.

If Mitt Romney wins the U.S. presidential election, will these investments suffer a serious blow? This is not likely. As we saw during President George W. Bush's administration, inflation and oil prices can get out of control just as easily when a Republican governs the United States.

Disclaimer: My standard disclaimer for my analysis can be viewed here.

Source: Profit From Treasury Bonds And Oil Producers In This Election Cycle