Cisco just posting its worst revenue decline in five years. And gdp in the Second Quarter did not go at all. The compass the economies of both germany and france actually shrank. U. S. Markets are waking up. You are with that european news. We are joined by Bloomberg Economist david howell. The numbers for germany, france, both worse than excited. Itd take the markets by surprise . Yeah. Both of those numbers were less than expected, so they took the markets by surprise. The moral of the story is the drag on growth came from weakness because of the unusually mild winter in europe having advanced construction activity, which kind of stole away from the Second Quarter. The other is the drag from that export, which is partially linked to the situation in Eastern Europe with russia being a very large trading partner of germany. That meanid, does things will get worse, or was this just a oneoff . Unfortunately, it looks like things are set to it looks like the growth picture is set to stay week. We have had a number of leading indicators over the past couple of days. They include the bank of franc businessndicator sentiment indicator. Their growth picture does not really looks set to brighten in the months ahead. Just quickly, david, what does this all mean for monetary policy, the ecb . Essentially what it means for ecb is it will the pressure will increase on them to ease, and it will certainly give the governing council some strength to push for that. Ok, david, thank you so much, david powell, our economist in london on all the news out in europe. Back in the u. S. , a lot of news on the retail front. I want to start the biggest of sales walmart saying that growth was stagnant and cut its sales growth for the year. Senior markets correspondent julie hyman have gone through all of this. What are doing better than the ones we have heard of yesterday. On a sort of incremental basis, things got better after five quarters of declining sales , but that is probably the best of the news because walmart cut llyearecast for fu earnings. Before it had looked for as much per share. The company is 22 not things going on in its core business it actually set Health Care Costs are rising. The same reason so Many Companies have been fighting both Health Care Costs, inflation, as well as an enrollment, higher than expected by the company increasing in rome at and the higher tax rate, so it is pointing sort of to that. It is investing more in ecommerce. By the way, saying today that ecommerce, which has been a strength for walmart, that it is going to grow less than anticipated, more like the range instead of the mid30 range. What is the buzz on the new ceo . It seemed like he is well regarded, but it is just a matter, the big challenges he has ahead of them. There are things that are not. Nder walmarts control low income consumers are still struggling. We are not seeing a lot of wage inflation. At the same time, we are seeing things and things like meat, dairy, produce. This is challenging for many walmart customers. It is trying to increase the number of products it sells, sort of lower price points, which might cater to those consumers. Inasmuch as he has control over trying to get those people into the store and spending more, he has a big challenge ahead of him. Ok, julie, just to stay with me on walmart and retailers. We just heard from her, new u. S. Has a tough road ahead. Stemberg is the founder of staples. He is the chairman of d. C. Firm Hyman Capital partners. He is investing in other retail oriented companies. As i mentioned, julie staying with us for this conversation, what is going on here . We have some sort of Inflection Point here for retailers . Sort of more of the same. Things are not horrible, but theyre not Getting Better nearly as fast as the president might suggest. Ok, why is that . I think the consumer lacks confidence. With whateir tax their credit card balances are and so forth. They look at the news every night, whether you look at ukraine, middle east, what is going on with the health care in the united states, regulation in the united states. Small are a businessperson, entrepreneur, you are worried, and when you are worried, you do not spend. Tom, it is julie here. At the same time, your cost may be going higher. As i just mentioned, beef prices, dairy prices, food prices, that is not count as core inflation. They are still going up, and so maybe if you are a retailer, theyre getting racked by regulation in multiple ways. As soon as you get somebody to 35 hours a week, you have got to pay for their health care that, therefore you have to cut back your very best employees, under 30 hours a week, i should have said. A 35 hour employee has now become a 28 hour employee. The assistant manager, if he is 50,000, you have to begin to pay him by the hour and begin paying him over time. Which again is another hassle if you are running a business. ,ou have got obamacare itself these things are very difficult for the retail operator. On those labor costs, what do you think retailers should be doing . Welcome i hate to get political, but a new administration is a place to start with a different set of regulatory approaches because i think right now this has become very, very difficult in this business unfriendly world to now. Ed, particularly as a former ceo yourself, isnt it also good policy, especially of a retailer who has employees,cing doesnt it make sense to pay them more, to cover their Health Care Costs . Absolutely. Look at a place like costco or the container store. Absolutely. I would retch rather have an associate working i would much rather have an associate working 35 hours a week or more because theyre more dedicated, spending more time, better trained, etc. Environment has adjusted from a cost perspective, you absorb that the 30th hour, you will absorb 7,000 of cost. It becomes very difficult. I will say to you these retailers are succeeding, are the ones who take very good care of their associates. For example, j mclaughlin you mentioned earlier, j mclaughlin is thriving with the high single low doubledigit sales, and their associates are extremely well compensated. That is an important point as well. Headm trying to wrap my around this argument because what other unions are saying is you need to pay the workers better, which is what you are saying ultimately. You are saying we should be paying better, and remember, tom, this is an industry where you have the biggest asperity between the lowest paid worker and the highestpaid employee, which is the ceo. That gap i believe is among the widest in any industry. Actually, i agree with you, and it should not be that way. I think if you find, though, some of the most successful retailers, cosco and whole foods as prime endeavors, are the ones where the spread is the lowest. Those retailers have a little more pricing power. I think that is how you differentiate whole foods or cosco, for example. The case of j mclaughlin, for example, that you are citing, how do they manage, then, the higher Health Care Costs and having the happy employees . How do you sort of balance that with being able to have healthy margins . Well, i think one of the things that covers a lot of ills is increasingly growing sales. When you grow your comparablestore sales by 10 a year and you are a very high gross margin business because youre a vertical retailer, that covers a lot of these costs, and you can afford to absorb them. On the other hand, if youre selling commodities like walmart were the margin is much tighter, it becomes much more difficult. Tom, i mentioned you are on the board of Many Companies, including lululemon, so you know a lot of the inside players in retail, and there are certainly retailers who are looking for good leaders, so who are some of the rising stars in leadership that you see are doing the right things and who could move onto bigger jobs . There is a woman named anna baxter at michael kors who i think is absolutely sensational of running the footwear business and doing a terrific job. There is a gentleman named David Mccreight who is joining the board of one of our companies, he is the star performer for urban outfitters. I think that is a name to watch as well. All right, tom, thank you so much for joining us. Tom stemberg, the founder and former ceo of staples. Our julie hyman, senior markets correspondent. Walmart is also in the news for a different reason. Workers at a Texas Walmart a huge surprise when a trail of trash led them to the hiding place of a 14yearold boy living in the storr. E. For more than two days, he ate, slept, and changed his close in two places inside the 24our store. One in a display of Baby Products and the other behind a stack of paper towels and toilet papers. The scene reminiscent of that movie where the heart is where Natalie Portman is forced to live in a walmart after being abandoned by her boyfriend. The boy is back with heis parents. I read that he wore diapers and so he would not be seen going to the afro. That is so sad. If youre going to run away, walmart is a pretty good spot, right . It is huge them easy to hide, and they have everything you need. But you think he would use the bathroom at some point. I know. Poor kid. Thanks, julie. Moving and shaking this hour Hedge Fund Manager bill ackman wants more firepower to invest any plans to raise money through an ipo of his purging square fun. Ackman has been considering an ipo for many years. Investors withdrew more than a quarter of the firms capital. In the meantime, he is prepared to double down on billiondollar debt against herbalife, which he a pyramid game. Ackman that has not paid up and he says he is willing to extend his short position if necessary. Coming up, we will look at his plan for an ipo. What do they have to gain by taking his funds public . In gaza isighting causing disarray in the local economy. Damage to israels most lucrative industry. Whacked activist Hedge Fund Manager bill ackman is willing to sell a piece of his power. The founder and ceo of Pershing SquareCapital Management says he offers new shares in an ipo. The sound like a daring step for him whose activism against management like herbalife recently lead to nasty and very public battles, but are there some hidden advantages to going public . Greg is joining a, is an activist investor. Nice to see this morning. You know ackman, right . I knew him for a while. What do you make of this news . I think he clearly understands that now is the moment for activism. Activist are making a big difference in the world and generating big the returns. Institutional investors are capable of investing and allowed to invest in hedge Fund Structures but also interest on investorsf individual and smaller institutions to get in on the game, and this is the allow allow that and to for that. What about the tiny echtimin . Over 10 years , on, greg, what about recently . Actors are generally doing well. One thing that is clear is that it is a volatile strategy. It is not one of the things where you want to put your last dollar and hope that next month it will be up at little bit. That is precisely why would momandpop want to invest in bill ackman . I think activists are the policeman of the capital market, and i think there is a lot of interest on the part of individual investors who are otherwise investing in index funds and passive managers to get in on the policing of these Capital Markets and the returns that they offer for those who take the extra step and do the elbow grease and work hard to make changes as a company. Right, but greg, hedge funds by their nature are very volatile, and you can see billions of dollars of capital wiped out on a couple of atbats. He saw that during the financial crisis. Being that it is a very volatile vehicle, why would any public investor, why would any investor want to invest in his Public Entity . Youve got to separate volatility from riskadjusted returns, so in a concentrated portfolio like the one that activists run, there certainly becauseolatility you own a few stocks and they can make a difference. Over a long square time, as Pershing Square has certainly mistreated, you can generate outsized returns, so it is a matter of stomaching along the way and being a longterm investor in activism is a great place to be because it generates alpha, as we collect, longform outperformance relative to the index. You do have to have some stomach for the volatility potentially along the way. Of course, other Hedge Fund Strategies actually have reduced volatility, so i would be careful about saying that hedge funds are always more volatile. Many of them are actually much less follicle. We certainly see the headlines when they are more volatile. Itit is the only time that is fun to report on them. What does bill ackman get out of it . He bets longterm, essentially permanent capital. The hardest part of being an activist is you do go through volatility. You go through periods of doubt. It is hard sometimes to convince your investors to stay with you and that your longterm vision is correct and it may take some time to workout. This is a way for him to have permanent capital. That can happen if you are a public company, too. You can have your investors bail out on you as well. You certainly can. Public Companies Face this problem all the time, but Hedge Fund Managers can have a particularly volatile investor base, and doing activism where you really do need to look at time rises of 3, 4, and five years, and i think Pershing Squares average investment is four years or more, you need to have the investor stay with you through the whole cycle and to the extent that theyre pulling their money out, they are pulling the rug out from underneath your investment. By the way, greg, would you go public . I think it is very attractive. Ok, greg, thank you so much, greg taxin, the president of the clinton group. Coming up, feeling the squeeze of sanctions is starting to hurt russias staterun oil producer. Sections are also hurting russia and other ways as well. We will be back. You are watching in the loop live on Bloomberg Television, streaming on your phone, and on bloomberg. Com. Good morning. I am betty liu. He Worlds Largest mobilephone carrier is getting even bigger. China mobile added more subscribers than its competitors last quarter. Profits beat analysts estimates. The nearly month old sanctions against russia are taking a, toll on the countrys largest countries. Sneft is looking looking for is internal financing. Next of those engines, rest of have a newfound love of swiss cheese. Food the government banned imports from nations supported the sanctions, russians have turned to switzerland for everything from a thrill it to gouda. The swiss have warned that they will not be able to make all of russias cheese demand. Youd better watch out. And it is 26 past the hour, so that means bloomberg is on the markets. We are Holding Steady on some of these games. Walmart disappointed with their outlook and also jobs will be out in a few moments. Again, another measure, another read on the economy. Ofer more than five weeks peace negotiations at a seeming standstill, visitors are avoiding israel in the thousands. It comes at the peak of tourist season, dev singh wouldve israels most devast devastating israel. In the alleyways and markets of jerusalem, one consequence of the gaza conflict remains beyond dispute. Tourism here has been devastated. How many customers do you have at the moment . At the moment zero. None. My guide to the city runs a small touring company to those visiting jerusalem from near and far. During better times, his clientele ranges from day tripping israeli couples to those visiting from china. The latest round of conflict in gaza have invited the entire tourism trade, one of israels largest economic drivers. We talk about close to 4 Million People coming to israel, 6 billion a year, which is very important for countries like us. This year, said of the 4 million visitors to israel, it is predicted that number will fall to 2. 8 million with farreaching effects. Airlines will be affected, hotels being affected, transportation, buses, guides, restaurants, taxi drivers, travel agents. Ill most everybody will be affected somehow. Historicusalems center, the bells toll for businesses that belong to both israelis and palestinians. Normally this time of year, you would have people everywhere. Everywhere, especially in the market. While Israeli Citizens demand answers from their political leaders, many israeli workers require assurances from their bosses. I have to show my employees that they are working in a good place and i can provide them and i do notjobs, tell them to go home. Israels government has promised to compensate businesses that have suffered losses because of the conflict, but for many here, any loss of income is nothing compared to any loss of life. There is people suffering a lot more than us. Ofwe just have a few months quiet, we can reach a stable atmosphere. We can manage. We can manage. Have you met any in your travels, willem marx, or have they gone completely from the street . Ready, i was having a coffee around the corner, and on the table next to me was a family of french tourist, so i have encountered quite a few of them. The beaches of tel aviv have forest tourists there. Million two maybe 3 million tourists in a country of 7 million, that is obviously very significant. Obviously it is significant. The people who are working that whatsm industry, willem, do they tell you is their biggest overall worry other than the fact that their numbers are coming down . I think everyone will hear will tell you what they want is peace. More than that, the focus is uncertainty. Not just in the shortterm. They are talking about their tourism numbers moving into 2015, 2016, worried that they negative impacts of this current conflict is going to last through t