By L.A. Little of tatoday.com, author of Trade Like the Little Guy.

The iShares Dow Jones Transportation ( IYT) exchange-traded fund is both tradeable (liquid) and highly correlated to the Dow Jones Transportation Average. It's the investment vehicle of choice to trade the transportation sector.

The weightings aren't exact when compared with the transportation average, but they do track quite closely. As can be seen, railroads account for a significant portion of the ETF weighting.

Since Warren Buffett announced a buyout of $100 a share for the remaining Burlington Northern ( BNI) stake, IYT has shot up almost 16%. This has led some to think that Buffett might be the latest bubble blower. I'm not so sure we can jump to such a conclusion though.

Before one can even begin to debate the question of whether Buffett is bubble blowing, we probably need to define just what a bubble is. I am unaware of a concise, written and agreed to definition, but the general thought seems to be laced with these two criteria:
  • Prices have moved up precipitously over some period of time.
  • Price points are extreme (far too high) when compared with the real value of the underlying asset (you can choose the various measure to use when determining real value depending on the asset class being evaluated).

If you liked this article you might like

Transport Stocks Are Flashing a Major Signal

If You Are a Crazy Bullish Investor Right Now This Chart Should Be Terrifying

Don't Rely on Old Dow Theory Alone When it Comes to These Sectors

7 of 11 S&P Sector ETFs Set Post-Election Highs, While Energy Sets Post-Election Low