Zurich, Switzerland

I’m pretty confident that commodities are now entering the gates of “bubble” territory.

I’ve edited a commodity service since 2003 and it might be in my best interest to suggest otherwise; but I won’t.

Most commodities have now entered what I would coin “the stupid phase” of the cycle. That’s when everyone is bullish, money is pouring in like mad, the China factor justifies every price spurt and ETFs are popping-up like new Facebook subscribers.

Just what defines a “bubble” and should investors be running for cover after an asset has posted marked gains?

A “bubble” is defined as a relatively overvalued asset class that has already posted tremendous gains over a period of time. It’s also always accompanied by investor exuberance for that asset, massive fund inflows and a constant introduction of new products to appeal to the masses.

Finally, once mergers and acquisitions run wild and new initial public offerings are the menu du jour, you’ve got trouble brewing.

Even the most devout commodities bull would have a hard time saying that we’re in the first or second inning of this nine-inning bull market. Commodities won’t appreciate forever. High prices will eventually incite more supply and there’s no stopping that. China won’t stop it. Nobody can. Markets always respond to the needs of supply and demand.

The good news is that we’re probably in the 6th or 7th inning of this secular commodity bull market with big gains still coming. But let’s be honest: We’ve already seen huge rallies for things like tin, nickel, lead, copper, gold, silver, palladium and platinum since 2000.

Agricultural commodities have only recently skyrocketed but aren’t trading at distressed prices anymore. And oil has surged more than eightfold since bottoming in late 1998. Farmland barely yields 4% in the United States and isn’t cheap anymore; ten years ago, farm-belt yields were in excess of 8-10%.

To be sure, reckless U.S. monetary policy and a currency crisis in the eurozone are aiding and abetting this rally in raw materials because investors are rightly concerned about paper money. The Chinese are also an undeniable demand source and remain the single largest importer of most raw materials. This information is long baked into prices. Everyone knows this.

When everyone and his dog is buying the same thing, you know the cliff isn’t far away.

I don’t care if we’re talking about tech stocks, Dutch Tulip-mania or U.S. or British real estate. Prices are elastic and don’t expand indefinitely. Bubble-watchers beware. There’s a bubble brewing in commodities.