Chinese officials are unhappy at mounting political pressure on the economic dialogue from the US side. Analysts say the bitter experience of the Chinese delegation in Washington, DC, may lead Chinese leaders to think twice about the relevance of the SED, which was founded last September by Presidents George W Bush and Hu Jintao.

US Treasury Secretary Henry "Hank" Paulson has designed a seemingly long-term "high-quality" discussion mechanism on complex issues facing the two countries' economic relations.

But in the opinion of some Chinese officials and analysts it now looks more like something to coax China into an endless circle of yielding to one short-term demand after another from Capitol Hill, Wall Street, US government departments, and a variety of pressure groups.

"Each time, China makes some concessions and then the US side mulls more political pressures for next time in hope of getting more," said an analyst in Shanghai. "So what's the purpose of the so-called 'strategic dialogue'? And what will China expect from the third round of the Strategic Economic Dialogue in Beijing six months later?"

while the NASDAQ is still valued at less than 50% of what it was seven years ago, investors seem more than willing to get in or stay in "for the long term". For those, like us, who "can't see the collective wisdom of the market", who think that things like debt, sharply falling retail sales, sharply falling housing sales, and wars with no end matter, we need to get over our worries and realize that the Dow is going up and that nothing else matters but price.

After all, the Dow is hitting all-time highs, and if we missed out on its 13%, 1,600-point rise over the last 10 weeks, we must be fools. There's no time to ask questions - just fire the trader, manager or newsletter that does not "get it", and move on. As in all credit-induced manias, at the end of the day the only thing that matters is recent - and I do mean recent - performance.

Jeremy Grantham explained this mindset in his recent quarterly letter to his institutional clients: "The more leverage you take, the better you do; the better you do, the more leverage you take. A critical part of a bubble is the reinforcement you get for your very optimistic view from those around you." [2]

As all true contrarians know, this is when making decisions opposite of the herd is the hardest, and yet, as history has shown, this is when it often proves most rewarding. So let's look at three variables that all investors should be evaluating right now to resist the siren's song of higher equity prices as we pass through this ever-rising sea of debt.

Political tensions between the US and Germany over climate change have worsened sharply, with Washington threatening to no longer "tread lightly" in negotiations on global warming ahead of the Group of Eight rich nations' summit next month.

The US has sent Germany a harshly worded statement in which it accuses Berlin of ignoring of Washington's "serious, fundamental concerns" with Germany's draft climate change communiqué for the Baltic coast summit.

The statement, written in red ink and obtained by the Financial Times, says: "We have tried to 'tread lightly' but there is only so far we can go given our fundamental opposition to the German position."

The Mahdi army Shia militia vowed last night to conduct revenge attacks on British soldiers in southern Iraq after its Basra leader was killed by Iraqi special forces in an operation supported by UK troops.

Wissam Abu Qader, described by British officials as responsible for criminal activities and attacks against foreign troops, was killed shortly after leaving Friday prayers. A British army spokesman said he died while trying to resist arrest. An Iraqi military intelligence officer said he was travelling in a car with two other men when it came under fire.

WASHINGTON, May 25 (IPS) - Two major studies prepared by the U.S. intelligence community and distributed to senior officials in every relevant agency two months before Washington's invasion of Iraq warned of many of the problems that have turned the U.S. occupation there into the worst foreign policy crisis since at least the Vietnam War.

The studies by the National Intelligence Council (NIC), redacted versions of which were released here Friday by the Senate Intelligence Committee, warned that the U.S. invasion and subsequent occupation would likely benefit al Qaeda and boost political Islam throughout the region. It also predicted that "domestic groups (in Iraq) would engage in violent conflict with each other unless an occupying force prevented them from doing so."

In addition, the NIC anticipated the emergence of an insurgency consisting of ex-Baathists "(who) could forge an alliance with existing terrorist organisations or act independently to wage guerrilla warfare against the new government or Coalition forces."

"Sadly, the administration's refusal to heed these dire warnings -- and worse, to plan for them -- has led to tragic consequences for which our nation is paying a terrible price," said the Committee's chairman, Jay Rockefeller, as he released the two studies which were incorporated into a 226-page report.

A senior legal official who secretly warned the government of Israel after the Six Day War of 1967 that it would be illegal to build Jewish settlements in the occupied Palestinian territories has said, for the first time, that he still believes that he was right.

The declaration by Theodor Meron, the Israeli Foreign Ministry's legal adviser at the time and today one of the world's leading international jurists, is a serious blow to Israel's persistent argument that the settlements do not violate international law, particularly as Israel prepares to commemorate the 40th anniversary of the war in June 1967.

The legal opinion, a copy of which has been obtained by The Independent, was marked "Top Secret" and "Extremely Urgent" and reached the unequivocal conclusion, in the words of its author's summary, "that civilian settlement in the administered territories contravenes the explicit provisions of the Fourth Geneva Convention."

A BIG jump in the cost of electricity because of the drought is expected to hit households later this year, the nation's energy ministers having been warned the drought could cause power generators to be shut next year.

Wholesale electricity prices have almost doubled in the past two months, and the price of new contracts for big electricity retail buyers are increasing between 40 per cent and 100 per cent. "The drought is the foundation factor in the price rises," Mr Domanski said yesterday.

Did the U.S. military use cluster bombs in Iraq in 2006 and then lie about it? Does the U.S. military keep the numbers of rockets and cannon rounds fired from its planes and helicopters secret because more Iraqi civilians have died due to their use than any other type of weaponry?

What we do know is this: Since the major combat phase of the war ended in April 2003, the U.S. military has dropped at least 59,787 pounds of air-delivered cluster bombs in Iraq -- the very type of weapon that Marc Garlasco, the senior military analyst at Human Rights Watch (HRW) calls, "the single greatest risk civilians face with regard to a current weapon that is in use." We also know that, according to expert opinion, rockets and cannon fire from U.S. aircraft may account for most U.S. and coalition-attributed Iraqi civilian deaths and that the Pentagon has restocked hundreds of millions of dollars worth of these weapons in recent years.

• The Iraqi refugee crisis is growing. "According to estimates by the European Council on Refugees and Exiles, the number of Iraqis displaced within Iraq -- already some 1.9 million -- is growing by 40,000 to 50,000 each month. Well over 2 million have made it across the border to neighboring countries -- Syria now hosts some 1.2 million Iraqi refugees, and Jordan has crammed in 750,000, representing an almost 15 percent boost to that country's population."

• The Pentagon stated China "is spending far more on its military budget" than it acknowledges. A report given to Congress suggests China has a "greater ability to mount pre-emptive strikes, citing new submarines, unmanned combat aircraft and sophisticated missiles." If the United States was truly concerned, then it would stop buying everything from China. Instead, this is a move to further increase U.S. military spending. China would sooner buy the United States than start a war with the country.

• The Bush administration has flatly rejected suggestions by Germany that leaders meeting for the G8 summit should address global warming. The meeting is scheduled to be "held at the German resort of Heiligendamm from June 6 to June 8."

  The treatment of climate change runs counter to our overall position and crosses multiple 'red lines' in terms of what we simply cannot agree to... We have tried to 'tread lightly,' but there is only so far we can go given our fundamental opposition to the German position.

  The German police are appealing a court ruling allowing protests at the G8 summit.

• "U.S. intelligence analysts predicted, in two papers widely circulated before the 2003 Iraq invasion, that al-Qaida would see U.S. military action as an opportunity to increase its operations and that Iran would try to shape the post-Saddam Hussein era in Iraq. The top analysts in government also said that establishing a stable democracy in Iraq would be a long and turbulent challenge."

  They also said that competing Sunni, Shiite and Kurd factions would "encourage terrorist groups to take advantage of a volatile security environment to launch attacks within Iraq." Because of the divided Iraqi society, there was "a significant chance that domestic groups would engage in violent conflict with each other unless an occupying force prevented them from doing so."

• "Congress approved almost $100 billion in military spending for Iraq without the troop-withdrawal timeline Democrats had demanded, giving... George W. Bush a legislative win after months of debate over war policy." Bush quickly signed the legislation into law. The law also has "$1.9 billion more for military health care; $1.8 billion for veterans health aimed at reducing a backlog of claims by veterans of Iraq and Afghanistan".

• George W. Bush said "We're going to expect heavy fighting in the weeks and months. We can expect more American and Iraqi casualties... It could be a bloody -- it could be a very difficult August." Not for you Bush, you'll be at your Crawford estate.

• Congress "approved the first increase in the federal minimum wage in nearly a decade, voting to boost wages for America's lowest-paid workers from $5.15 to $7.25 an hour over the next two years." Bush said he would sign the bill.

• The House passed ethics reform legislation "that would penalize lawmakers who receive a wide range of favors from special interests, and would require lobbyists to disclose the campaign contributions they collect and deliver to lawmakers." A similar bill has passed the Senate and will be resolved in conference this summer.

• In court papers, U.S. attorney Patrick Fitzgerald said Scooter Libby deserves a 30 to 37 months prision term because he "lied repeatedly and blatantly".

• The Senate will hold a vote of no-confidence on Attorney General Alberto Gonzales in June. "When a situation becomes so serious that there's a crisis in leadership of this magnitude, a Congress not only has the right to weigh in, we have a responsibility to take action," said Sen. Chuck Schumer (D-NY).

• The presidential campaign of Sen. Hillary Clinton is in damage control mode after the "leak of an internal memo that urges her to skip the key early caucuses in Iowa - on the ground she has better places to spend money than on a contest she may well lose." Sen. Clinton returned to Iowa reassure voters there.

• "Tom Heffelfinger, the former U.S. attorney for Minnesota, said controversy over the firing of federal prosecutors shows 'something is fundamentally broken within the Department of Justice.'"

• Fewer candidates are applying for positions as U.S. attorneys. "The Bush administration's decision to fire nine U.S. attorneys last year has created a new problem for the White House: The controversy appears to be discouraging applications for some of the 22 prosecutor posts that President Bush needs to fill."

• Star Wars opened 30 years ago today at just 32 movie theaters.

• After spending the past four months in Iran, Muqtada al-Sadr returned to Kifa, Iraq where he gave "sermon in a local mosque" to "a large crowd amid heavy security". Al-Sadr "called for American forces to leave Iraq, but pointedly did not say how quickly those troops should leave, as he has in the past."

• The Mahdi army Shia militia promised to "conduct revenge attacks on British soldiers" in Iraq after Wissam Abu Qader, their leader in Basra, was killed by Iraqi special forces in a joint Iraqi-British operation.

• Twenty-seven people were killed and dozens injured in Falluja, Iraq when "a suicide bomber drove into a crowd gathering for a funeral procession" for Allawi al-Issaw, an assassinated Sunni leader.

• Russia is likely to postpone construction and talks with Iran because of "persistent payment problems" with the the nuclear power station being built in Bushehr.

• Israeli troops in Nablus, "took the Palestinian Education minister Naser al-Shaer, three Hamas members of parliament, the pro-Hamas mayor and deputy mayor of the city and other Hamas officials in neighbouring towns and villages." At total of 32 Hamas officials were seized on the West Bank.

• Gunmen kidnapped "a group of oil workers including four Britons and three Americans" from a pipeline-laying boat off the Nigerian coast".

• The trials for "more than 50 defendants from a group called Ansar al-Mehdi" was postponed in Sale, Morocco after opening for a day of hearings. Moroccan authorities "are on high alert after five suicide bombers blew themselves up in Casablanca last month."

• "Women make up 70 percent of Algeria's lawyers and 60 percent of its judges. Women dominate medicine. Increasingly, women contribute more to household income than men. Sixty percent of university students are women".

• Sweden is leading Europe in welcoming Iraqi refugees. "The Scandinavian country took in some 9,000 Iraqi refugees in 2006 -- over 40 percent of the 22,000 Iraqi refugees who found their way to Europe."

• Turkey's President Ahmet Necdet Sezer "vetoed a newly passed constitutional amendment that would have allowed the people -- and not Parliament -- to elect the new president."

• As election results come in, Bertie Ahern looks to have won a "record third term as Ireland's Prime Minister".

• Anti-nuclear campaigners "began mobilising public opposition to any attempt to site new nuclear power stations in the South of England" after a British government study recommended building new "strategically placed" power plants.

• The Regional Committee for Viticultural Action, dubbed by the media as "wine terrorists", have threatened France's President Nicolas Sarkozy, vowing that if the price they receive for their wine haa not improved, they would go "into action".

• In a demonstration of European-wide high speed rail, France's SNCF and Deutsche Bahn AG, ran two trains to Paris: a German ICE train from Frankfurt and a French TGV train from Stuttgart. "The new TGV Est will cut travel time between Frankfurt and Paris almost in half, making it a 3½ hour downtown-to-downtown journey."

• Palaeontologists presented evidence that some dinosaurs swam. A "15-metre-long trackway, located in La Virgen del Campo track site in Spain's Cameros Basin, is believed to have been left by" a large therapod, a carnivorous dinosaur, as it clawed at "sediment as it swam against a current."

• Mukhtar Mai resigned as head of a women's crisis centre in Meerwala, Punjab province, Pakistan "because she was about to be replaced by a woman from the ruling PML-Q party."

• "Sunil Bharti Mittal, the just-elected head of the corporate club, the Confederation of Indian Industries" rejected calls by India's prime minister, Manmohan Singh, to limit CEO salaries.

• Australians are being warned that electricity will be significantly more expensive because of the ongoing drought. Australia's "energy ministers having been warned the drought could cause power generators to be shut next year."

• North Korea test-fired several missiles towards the Sea of Japan.

• "Thirty-eight miners died and seven were hospitalized in a methane gas explosion... at the Yubileinaya coal mine near Novokuznetsk" in Russia's Siberia.

• "5,000 of the world's rarest animals have been found drifting in a deserted boat near the coast of China. The pangolins, Asian giant turtles and lizards were crushed inside crates on a rickety wooden vessel that had lost engine power off Qingzhou island in the southern province of Guangdong. Most were alive, though the cargo also contained 21 bear paws wrapped in newspaper."

• "Japan's prime minister, Shinzo Abe, unveiled ambitious plans... to cut global greenhouse gas emissions by 50% by 2050 that would include the world's biggest emitters, the US and China."

• A survey of major builders in Melbourne, Australia found that "about 80 percent of new homes have the solar hot water rather than water tanks."

• "Delegates from 68 countries met" in Lima, Peru to pledge support for "an international ban on cluster bombs". "The world's biggest producers of the munitions, the United States, Russia and China, were not among them."

• Canada's Supreme Court ruled that "the Charter of Rights does not provide litigants with a blanket right to obtain legal counsel" and unanimously upheld a British Columbia "tax on legal services that critics had criticized as forming a barrier to those who cannot afford legal services."

• The International Boundary and Water Commission concluded the fence the United States is building along its border with Mexico "designed to keep people from crossing the Rio Grande could exacerbate flooding and skew the national boundary". The fence will also negatively impact border wildlife including "ocelots and jaguarundi, both endangered species of cats.".

• "Mexico's National Human Rights Commission blamed both authorities and protesters Thursday for "excesses" during a months of unrest last year in Oaxaca, and urged the government to investigate its finding that federal police tortured detainees." 12 people, ", mostly protesters shot by gunmen", were killed in the conflict.

• Archaeologists scuba-diving in the twin lakes in a crater of the extinct Nevado de Toluca volcano "found wooden lightning bolts matching what Spanish priests wrote about more than 500 years ago when they described offerings by Aztecs to their rain god Tlaloc."

• Bush has 604 days left. 3,437 U.S. confirmed deaths in Iraq. Over $428,890,000,000 spent on the Iraq war.

On Wednesday evening members of four committees in the Kyrgyz parliament spoke out together in support of an initiative to abrogate the agreement that gives the US military permission to maintain an air base at Bishkek's Manas Airport. The loudest support for the initiative came from deputies close to Kyrgyz President Kurmanbek Bakiyev. According to information obtained by Kommersant, the impetus for the initiative comes from Moscow. The Russian authorities hope that President Bakiyev will officially request that the US remove its base from Kyrgyz territory by as early as August, when the next meeting of the Shanghai Cooperation Organization will be held in Bishkek.

The first potshot at the American base was taken by Kyrgyz Parliament speaker Marat Sultanov, who just returned last week from a visit to Moscow. Mr. Sultanov arranged a special meeting with US Ambassador to Kyrgyzstan Mary Jovanovich to tell her that "Kyrgyzstan will not allow its territory to be used against countries that are our allies." He then spoke publicly in support of deepening the country's military cooperation with Russia, particularly in terms of enlarging Russia's air base at Kant and returning Russian border guards to posts along Kyrgyzstan's southern border.