♪ >> coming up on "bloomberg best," the stories that shaped the week in business around world. equity investors find few reasons to be thankful as global stocks suffer through a selloff. >> this is a final captiulation for tech. >> i do think there is something approaching an old-fashioned growth scare. >> misconduct charges take down a legendary auto executive. relations between the u.s. and china get chillier. black friday caps a woeful week for the u.s. investors.

>> what are investors thinking? >> they are seeing e-commerce investments are very expensive. >> the path to brexit remains rocky at best. >> the british people want this to be settled. >> this deal is not acceptable. going back between this deal and no deal, i would choose no deal. >> leading figures in finance and investing survey the road ahead for markets. >> you can expect lower returns and probably more taxes. >> it is not surprising the markets are active. this is what markets do when they deal with uncertainty. they get anxious. >> it's all straight ahead on "bloomberg best." nejra: hello and welcome. i'm nejra cehic. this is "bloomberg best," your weekly review of the most

important business news, analysis, and interviews from bloomberg television. let's start with a day-by-day look at the top headlines. the week began with political tensions growing between the u.s. and china, following a weekend of exchanges at the summit. >> there are rising fears this morning of an economic cold war possibly dividing asia after the apec summit in papua new guinea and in disarray. for the first time in its 20-plus-year history, there was no statement. what went wrong? >> we heard xi jinping saying the trade war is short sighted and tuned to failure. he called for a stronger world trade organization and defended the belt and road initiative. very different opinions coming from mike pence and xi jinping. at the end of the day, they did

not come up with a communique because u.s. officials have told bloomberg the chinese rejected a reference to "all unfair trade practices." the other 20 nations apparently agreed to that language, the chinese did not. alix: nissan looking to remove alex ghosn as chairman this thursday, after he was arrested in tokyo for breaching financial laws. nissan has underreported income. >> they have come out and said they would look to oust him as chairman from the board of both of those companies. renault has not necessarily gone so far. ghosn exiting the picture scrambles the outlook for this combination of these companies. he was so key to these three and was really the face of the franchise. >> in an industry where optimism

and bullishness are built into the dna, doubts now starting to seep in about faang stocks. is this just market pessimism over all of these stocks? >> it seems like it. what initiated the selling today was the news over apple. there was a report at the wall street journal saying they had halted production over the past couple weeks. >> a really brutal finish. really across the board, dow down, and the nasdaq down 3%. >> 388 s&p companies down, and a huge chunk of the nasdaq down. >> you are sort of embroiled in this moment in a reset of expectations. we have been saying it for a

couple of months now, but especially when it comes to tech stocks, these momentum and growth stocks, they were very high expectations built into stock prices, and the expectation was these companies would continue to beat growth expectations. unfortunately, we have experienced an earnings season that told us otherwise. investors have lost a lot of confidence in respect to the outlook. this is the final capitulation for tech, which was formally the market leader. jonathan: stocks falling from london to shanghai. are we in a bear market? >> investors still see risks contained to specific sectors. markets are driven by idiosyncratic concerns. >> it is early stages, so you have not seen broad contagion.

i think the beginning of the end of the qe halycon days are over, and this is what we have heading into a slower growth environment. earnings have come off the boil, so it the inflection point is lower and markets are reacting to that. >> another selloff in the stock market. correction. everywhere you look, it seems that everything is down and unlike past selloffs, we have yet to see a bounce. >> what you do see that you didn't see in the last corrections, which is now clear-cut, is that there is a rotation within the stock market. the momentum trade has really hit the buffers this time in a way that it didn't do back in february. momentum sailed on through on that occasion. >> i would suggest, if you are trying to ask what is particularly creating angst today, i do think there is something approaching an old-fashioned growth scare. >> a new report from the u.s. trade representative accuses

china of continuing ip and technology theft. that is even after tariffs on $200 billion of chinese goods imposed at the end of september. this seems to be an update on that session 301 investigation on ip and intellectual property, innovation, technology transfer, and what exactly is it saying? >> this report fundamentally says that the u.s. trade representative has not seen any fundamental changes in the way china conduct its practices, especially with regards to intellectual property, and what they call forced technology transfer. the report, a detailed 53-page report, said china appears to have engaged in further activity in recent months as well. clearly, u.s. trade representative is not happy with any changes it has seen in china trad practices. these practices are the heart of the trump administration's grievances against the chinese. alix: the eu rejecting italy's 2019 budget. italy now faces a fine in the annual review of eu member nations. the body warns italy is in serious noncompliance of fiscal rules. do we see a risk of the country sleepwalking into instability?

>> we have not decided any kind of exit procedure today, but if there is no change, and if the member states agree on our proposals, then we are paving the way for the opening of such procedure. >> italy is the problem child for the european union. the debt is a problem, deficit is a problem, the growth is not credible for the european union and we have a warning from the european commissioner, who said, do not play this as a political game. we could be heading for a real crisis. for investors, this is tough language but little action. they don't think the european commission wants to trigger fines, because there is an election in 2019, and they don't want to hand more ammunition to euro skeptics.

he is saying i'm not going to change the key policy. that is not going to go away. mark: the japanese automaker's board voted to remove its chairman after charges of alleged financial misconduct. was it a surprise the board voted unanimously to oust ghosn? >> yes. in a word, it was a surprise. a couple days ago, we were picking up signs that there was discord on the board. we don't have all of the facts lined up at the moment. he should be presumed innocent until we know more. that is the route the french side chose a couple days ago in their own board meeting, when they chose an interim ceo, but stopped short of actually kicking ghosn out. there is a big political factor in this. many players in this game, and we are far from knowing where it will end up. >> the u.k. and european commission have agreed to a brexit deal. it sets out a vision for closer economic ties in a draft that hands theresa may some key political winds. ms. may: the british people want this to be settled. they want a good deal that sets its own course for a brighter future. that deal is within our grasp. >> she has managed to secure

significant concessions to the european union in this final draft of the future relationship. they are designed to assuage some of the biggest criticisms she has had from her own side and both sides. she is now challenging parliament to get behind her and pass this deal. francine: spain is threatening to vote against the brexit deal to be signed off by eu member states on sunday. spain criticized changes to the accord on the issue of gibraltar, describing them as treacherous. >> the text was changed, and they weren't told. bear in mind that spain alone can't veto this brexit. obviously, it is not a good look. one of the members is opposed to this. the comment of the secretary of state, it sounds like they're open to a fix. if the european union comes up with a document that says this is not going to be a problem, then it sounds like a fix is possible. taylor: if you're hoping for a quiet day in the markets, crude has not been your friend. brent plummeted below $60 per

barrel. higher trading volume than normal. >> concerns about supply coming out of saudi arabia or the u.s. in the shale basin, this is weighing on prices to a level that doesn't seem to have any real and in sight. >> months ago, we were talking about shortages in the market. saudi arabia was assuring everyone they would increase supply to meet that. $100 per barrel. that was going to be the price. that was realistic. that flipped overnight. what you are seeing now is a steady trended downwards. i wouldn't call it capitulation just yet, but no one wants to be long with this price. nejra: still ahead, as we review the week on "bloomberg best," exclusive insight on why investors should prepare for a world of lower concerns. -- returns. next, the reserve bank of india's battle with the government reaches a sort of truce.

>> make no mistake, the bank is at stake here. nejra: this is bloomberg. ♪

nejra: this is "bloomberg best."

i'm nejra cehic. let's continue our global tour of the week's top business stories. at the same time as global were selling off early this week, cryptocurrencies were in steep decline. shery: volatility returning to crypto. cryptocurrencies resumed their slump with a bitcoin falling below the $5,000 mark, following the split of one of the largest major tokens. is this all to do with regulation, more to come? >> regulation and enforcement should be good in the long-term, but markets are taking back the excesses of last year. it got to an extreme. last week, it hit a key inflection point. the market, it is going to get more supply and that will not be good. a hard for king bitcoin cash, people don't understand it, that is the problem. >> the great cryptocurrency

crash of 2018 is heading for its worst week yet. is there a shift in sentiment as a result of the drop? >> it is a bloodbath, a washout. we will see a lot of tourist capital if it hasn't already left, it will be leaving. there are these true believers and by their very nature, they are looking for the long-term and maybe seeing this as an opportunity to top up their holdings. >> the indian government has reached a truce with the r.b.i. over access to surplus funds. after a mammoth nine-hour board meeting, the bank has agreed to a demand for sharing capital. >> it looks like a compromise, but make no mistake, the r.b.i. and the independence of the bank is much at stake here. what the government has managed to get out is a committee that will be setup to look into the r.b.i. capital structure. secondly, the r.b.i. has made no compromise on that. they still remain under

structures. the capital buffer of the state run banks, which are at 9%. the government wanted it at 8%. the central bank has not compromised that, but they have compromise on liquidity easing measures for medium and small scale industry. those industries have been hit hard. they are very crucial to the prime minister's party. there has been give and take, but it looks like the central bank's independence is pretty much restored. guy: let's talk about president trump. he says he won't let the murder of journalist jamal khashoggi jeopardize relations with saudi arabia, and he says he will stand by riyadh regardless of whether the crown prince was involved in the killing. >> saudi arabia, if we broke with them, i think your oil prices would go through the roof. i have kept them down. guy: this latest statement just shows how difficult they are

finding it to walk a path that really addresses all issues and protects their interests. >> you would think so, but it looks like trump is not finding it difficult. he made a choice. he said, let's see what happens, then says we may never know what happened, and i don't care what happened. it is a horrible crime, but the relationship with saudi arabia goes above all. it is important to him and his base. guy: the south african reserve raised its benchmark rate for the first time in more than two years. the governor had to cast the vote to decide this, that tells us how close it was. why was it so close? >> the governor told us three members wanted this increase, and three wanted it unchanged. the reason it was so close is on the one hand, you have inflation

within the central bank's target, but still above where they wanted to be. on the other hand, you have an economy still in recession. the central bank had to balance those needs. guy: do you think it is one and done? >> the possibility is no. the central bank's own internal projection model shows four more of these rate hikes in the next few years. they made it clear there are looking at about four more basis point hikes before the end of 2020. >> the ecb published accounts of its october policy meeting a few minutes ago, acknowledging uncertainty and fragility, but saying that incoming data is consistent with broad-based growth. what are your big conclusions from this account of their october meeting? >> what we have heard from their account is in line with what they have been saying publicly

over the last few weeks. we were having the fragilities, the uncertainty, but the broader picture, the underlying strength of the economy is that it is doing ok. the recommendation we have been hearing from the ecb's chief economist has been, we have to look through the noise of the data and obviously, they will be able to sift through that noise when they meet in december. they will also have their own projections, so that will give them more clarity and a broader view on where the economy is going. they will also have projections for growth and inflation and that should allow them to make a more informed decision. guy: the euro weaker as the economy stumbles again. a key indicator has fallen to its lowest level in four years. we are talking about the pmi data that was out earlier on. it was the german number that was the issue on the manufacturing side. at the beginning of december, we will get new projections from the ecb. are they going to make it difficult for the ecb to make

the argument that it needs to begin exiting from stimulatory policy? >> i think so. they are pretty committed to ending qe, but they will move to forward guidance and think about rate increases, but that makes it harder. you have oil prices collapsing, so it will be hard to forecast. the near-term inflation called remains relevant. it is not obvious why raising interest rates is getting anything but weaker at the moment. ♪

nejra: you are watching "bloomberg best." i am nejra cehic. bridgewater associates ray balleo stopped by bloomberg's headquarters this week to speak with bloomberg opinion columnist on the masters of business podcast. he offered a mixed outlook, saying investors should prepare for lower returns but claiming he is not worried about chinese debt. >> i think if you are an average investor, there is alpha and there is beta. you have to prepare for lower returns in the future. if you take these obligations, i'm talking debt obligations, but there are unfunded pension obligations, health care and in obligations. there are a lot of obligations. it is essentially lower real interest rate and asset returns. as most people should not be making tactical movements out of markets. i think that is different. they have to know how to balance their accounts. that is why when i referred to risk parity, how do you balance those things?

you have to have a balanced portfolio. concentration is a risky thing. or you have to be able to time markets and that is a difficult thing to do. now, you are dealing mostly with an internal issue, with also the lenders to china within their system. like i said, the capacity to handle a debt crisis by spreading it out in one way or another is quite large. they have the expertise to know how to do that, to spread it out. i think that when you look at debt cycles, there were four cases in which the united states defaulted, had major debt crises. i won't rattle them all off. the lesson i gave of the 1982

debt crisis that i was so long about was the ability to spread that out and lower interest rates at the same time. china has that ability. everyone is focused on that and too focused in on that, and not focused on productivity growth and how they are making changes in terms of productivity growth. a bad year of growth will be probably twice as good as a good year of growth for us, in terms of the whole productivity thing. if you look at indicators of productivity over time, quality of infrastructure, those types of things, they have the reasons to have high productivity. it looks like one of those cycles, their version of a cycle, to do a debt restructuring. they are doing it on a proactive basis, before the cycle is actually in crisis.

in most of the other cases, like in the 2008 financial crisis, you have the crisis, then reaction. i am not worried about the debt crisis in china, and i believe it is going to be a very good place for long-term investment. nejra: coming up on "bloomberg best," another influx of earnings reports, featuring chinese tech and u.s. retail companies. plus, more of the week's most compelling conversations. barclay's chairman speaks exclusively with bloomberg.

he doesn't think investors are taking u.s. china tension seriously enough. >> this is a very big thing, and i think the market interprets it. nejra: this is bloomberg. ♪

nejra: welcome back. i'm nejra cehic. the drama surrounding brexit negotiations continued this week with prime minister theresa may pushing her separation plan forward while others lineup for or against. several figures stated their opposition, starting with an jeremy corbyn. in an interview, he told us he will not rule out supporting a second referendum. he will vote against theresa may's deal. >> why not? theresa may says it is in international interest. >> it puts us into customs arrangement for several years that we have no say over

whatsoever and can only leave with permission of the eu. >> that is the backstop. she says nobody intends to use that. >> why is it there then? if no one is intended to use it. you have to question why it is there. it does not deal with the question of northern ireland. it says the border between northern ireland will be an open border. where will the border go other than a different trading relationship? it does not meet those terms. >> she says time is running out. this deal or no deal. will you accept that if you vote against you take us closer to no deal? >> there were two and a half years to negotiate, and they clearly have not. now telling us there is not time. this deal is not acceptable, and this represents a failure of

negotiation. go back to the house of commons. this is the kind of arrangement we want for the future. there would be majority support. we have spent a lot of time talking to people all over europe in the past two years. we cannot negotiate. we made clear the kind of relationship we want. we have not sent the equivalent of liam fox to sign-up for 40 trade deals, none of which exist and say, we can do business somewhere else or cut wages and conditions. no.

they said something more positive. >> it sounds that this could take us closer to no deal. would you be prepared for that? is that a price worth paying to see a general election? >> we will demand a deal with the european union that protects jobs, living standards, and work conditions. >> they say there is no other deal. >> they are bound to say that, aren't they? the eu has a history of saying, nothing can be changed. i remember the lisbon treaty. they renegotiated that quite quickly. >> i think the likelihood of her changing her mind is small. she does not often change her mind. >> they will go and talk to her. if i were giving her advice, i would say, put the proposal to the house of commons right away. you have 500 odd pages of it. >> it has to go to brussels first, doesn't it? >> not really. it is agreed with negotiators. why do need to go to brussels first? why not come straight to the house of commons.

she goes to brussels and they say fine, we like it and then it is defeated in the house. what does that do for you? the difficulty now is we're going to run out of time. you showed a graph that said deal or no deal. the no deal leads to chaos. no, it doesn't. the novo leads to going back and talking again. if we go to no deal, it will be uncomfortable for britain but a lot more uncomfortable to other european countries, holland, belgium. my view is this deal is no good. it is actually worse than membership, and if it comes down to it and it is between this deal and no deal, i would rather go no deal. >> tensions between the u.s. and china have been escalating and contributing to market fluctuations. as volatility spiked this week, barclays bank chairman joined bloomberg markets: asia for a conversation. he says investors had best pay close attention to the clash between the two largest economies. >> my own investment thesis is that a global revolution started a few years ago. because it was not a revolution with young men on tanks, it was not noticed in the way that some

revolutions are. this was a revolution fueled by populism and fueled by the breakdown in multilateralism and the rise of the nationstate. the markets found it hard to price those risks and tended to ignore them. these risks are manifesting themselves pretty much everywhere you look in the world. i think this volatility and uncertainly is going to continue. >> how long does this last? are we at the beginning of this phase in trying to price that in? i would imagine that showing up

in the u.s.-china trade spat is perhaps one of the symptoms. >> by 2049, china expects to regain its position as the world number one state. period. i have seen plans going out for 2049 to achieve that. i have been to china over 200 times. i go there once a month. i am quite familiar with what is going on there. this trade spat is the first manifestation of what is going to be a 30 year jostling -- >> war without the war and without the bullets. cold war. >> i could not have described it better. there are manifestations in the belt and road. you see manifestation in the bipartisan dislike of china in the u.s. this is a very big thing. i think the market under interprets it. it looks at trade wars day by day basis.

it waxes and wanes. >> it is all headlines at the moment. not exactly the long-term trend we're seeing. >> yes. it is a fight as to which attitude will become important. remember, the chinese think the last 300 years were mistake. the chinese have a very strong folk memory where they were top dog. the chinese attitude is to give it a little more time and they will be top dog again. america is catching on to that and frankly does not like it. >> investors are catching on to that, or are beginning to. >> they are beginning to. nejra: in an exclusive interview, erik schatzker sat down with morgan stanley's ceo at the bank's new office and offered further insight into the turbulent state of global markets. >> if you step back, we are in a tightening process around the world led by the u.s. three or four rate increases this year. that has consequences. the ability of the monetary authorities given shrinking balance sheets has limitations on what they can do and there is a lot of political turmoil. it is not surprising you are seeing correction. in certain sectors, incredible run-up in valuations this year. hundreds of billions of dollars

created in some of the economies. it is not surprising some of that is being taken off the table. >> there is a lot of debate. i guess the debate is reflected in the volatility that we see over a number of the things you just itemized. the sustainability of u.s. growth, for example, the pace of rate increases, magnitude of rate increases, the implications of the standoff that the administration is undertaking with china. is there any consistency around that debate as far as what you hear from clients? >> i think the most important thing to take away is there is a lot going on. every morning you get up, and there is a strong news flow from

overnight. brexit, terrorism, political risk, protectionism, anti-immigration. >> it is a much longer list. >> before we get to the markets, before we get to china, what is going on in the middle east, sanctions in russia, the war in syria, north korea, there is a lot for investors to absorb. when they are confronted with that and strong fundementals on one hand, on the other there is tightening. clearly, some corporate credit fall and issues around triple b credit. it is not surprising the market is anxious. this is what markets do when they deal with uncertainty, they get anxious. sometimes they get it wrong. in the long term, the market is always right. erik: there are so many directions to go. >> it is ok, i am all good. erik: is the volatility in financial markets good for morgan stanley's trading

business? >> honestly, i care more about how it affects our clients because if our clients do well, we do well. in the equities markets right now, some of the volatility is good, not great. the equity capital markets have been pushed back. more uncertainty around m&a transactions, but more transactions and more volume in cash, equity derivatives, that has been positive. erik: you are seeing more trading or bigger trades with clients? >> not necessarily bigger trades, but there is more volatility and with that more activity, on the other hand, you are seeing the calendar being pushed back. it gives and takes.

start looking at the fixed income space. these are more difficult markets for the credit shops in fixed income. we do not wakke up every morning and say, we hope the market is volatile and investors are anxious. this is not our objective. we look at the fundamentals and try to make sure our clients are well-positioned for whatever risk profile they have got. erik: what economic scenario are you baking into the firm's strategy for the next 12 to 24 months? >> we are in the middle of our budgeting process. i certainly do not expect growth above 3.5%. it will moderate. the stimulus came from the tax cut was effective, but that level of growth is unlikely. i am personally looking at 2.5% range where gdp growth for the u.s. is going to be.

erik: morgan stanley cannot do as well in a decelerating economy as it has in an accelerating economy? >> you have to look at all the mix of our businesses. some of the businesses to better in a decelerating economy. as a backdrop, what i care about is, i am not that focused on the market turmoil. i am focused on the long-term strategic positioning of the firm. we are strategically in a great place for the next decade of growth. i am less focused on what is going on now. ♪

nejra: this is "bloomberg best." i am nejra cehic. let's resume our roundup with a focus on company news. earnings season is in the home stretch with big names in chinese tech taking the spotlight. >> chinese smartphone giant xiaomi reported

better-than-expected earnings, revenue jumped nearly 50% in the third quarter. what were the highlights? >> this is a story about smartphone shipments and the emerging market. the strategy to derive sales from countries like india, southeast asia, and europe. xiaomi saw strong sales in spain. in terms of smartphone shipments, those were up for the quarter 21%. bear in mind that globally, the smartphone market is seen by most analysts as being in contraction. there is a price xiaomi is paying because competition is intense, not just domestically in china, but increasingly in countries like india. you see the margins being squeezed from 6.7% to 6.1%. shery: chinese e-commerce giant falling to its lowest in almost 18 months in lower-than-expected revenue in the third corner. feeling the impact of the cooling chinese economy. >> investors took notice of that. the stock was down 8.5%

yesterday. it is down year to date almost 50%. it is facing a complex environment domestically. that is reflected in these results. revenue is disappointing. forecast for sales in the fourth quarter came in below estimates. the other point of note was the fact that the annual active users fell for the first time since the 2014 ipo. that will be of concern to investors. they are facing increased competition from a saturated e-commerce market in china.

competition at the low-end and competition from alibaba as well. the founder of the company is facing clouds, as well, because he has faced allegations of rape in the u.s. over in the u.s., they are waiting to decide whether or not to press charges. it is something that richard lou and the company, allegations they deny strongly. that is another factor to add into the mix. >> easyjet full-year revenue 5.9 billion pounds, the estimate was 5.85. that looks to be in the ballpark of the estimate. the dividend per share is coming at above estimate and the adjusted is 118.3 and a looks to be ahead of estimates. can you tell me about the resilience of easyjet to the various headwinds we are seeing for the sector, how competent for the future are you?

>> it has been a fantastic year for easyjet, particularly in the backdrop of some of the difficulties that a number of airlines have had in 2018. the numbers are a record profit if you exclude the transaction we have been involved with with air berlin. we have a record number of passengers, a 10% increase. it has been a really, really good year. >> retail stocks are getting hammered today with some of the worst performers in the worst performers and indices like target, kohl's. some warning signals from the earnings reports, which were good overall. what are investors thinking? >> they are panicking about growth margin. that is where the concern is with target, kohl's, and tj maxx, which reported a while ago. all of these e-commerce

investments are expensive and they are wondering if this is a moment of is it as good as it gets for retail. they have a strong consumer sentiment. they are worried about the long-term impact on profitability that comes with competing against amazon. guy: deutsche bank, shares in the german lender hitting a record low. investors turn their concern to deutsche's potential role in a money laundering scandal. what is confirmed about deutsche's potential involvement in the scandal? >> nothing has been confirmed on the record. what has happened is that yesterday, the whistleblower at the center of all of this, a

deutsche bank employee said a european bank with a u.s. subsidiary is involved and he was referring to deutsche bank and everyone is now asking what exactly was its role? did it know about these? what could it have done to prevent it? it was not correspondent. what can happen to deutsche bank? i think investors are trying to figure out what this means for deutsche bank as a whole. >> the hits keep coming for goldman sachs. this is over links in malaysia. they are facing an investigation in the u.s. and may have to return fees it received from malaysia. now two investment funds from abu dhabi are suing over what they say was goldman's central role in the whole scandal. this is a surprise.

>> the bad news keeps coming for goldman. we had the 1mbd and now they're going to come after goldman on the funds that goldman helped them raised. one of the abu dhabi investment funds -- they tried to get involved. they are suing goldman. >> one of apple's biggest suppliers is cutting $3 billion in costs next year as it faces a difficult year. >> why are they making such deep cuts to expenses, and how do they plan to do it? >> there have been they concerns about the global iphone demand and customer sentiment. foxconn's cuts came out at the same time that a number of other apple suppliers have lowered their outlook.

the move indicates we may be expecting a tepid demand in 2019. this is going to be a difficult and competitive year ahead. companies like hp, sony, dell, and nintendo account for a large chunk of the company's sales. so far, so good. ♪

>> we put a terminal chart for you to show you stores across the u.s. in macy's stores. a number of people think that is too many and is a lot of value for macy's. this is clearly on the ceo's mind. there are 30,000 functions on the bloomberg, and we enjoy

showing you our favorites. maybe they will become your favorite. here is another function, quic . it will take you to our quick takes to get the us insight into topics. here is a quick take from this week. >> we are entering an era in which our enemies can make it look like anyone is saying anything at any point in time. >> jordan peele created this video of president obama to demonstrate how easy it is to put words in someone else's mouth. >> moving forward, we need to be more vigilant with what we trust from the internet. >> not everyone bought it, but the technology is improving, even as worries increase about the potential for harm. this is your bloomberg quick take on deep fakes. deep fakes, or realistic looking fake videos, gained popularity as a means of adding famous actresses into pornography, and they are easy to find. they are named for the deep learning artificial intelligence algorithms, input real audio or video of a person and the

software tries to recognize patterns of speech and movement. introduce a new element, like someone else's face, and a deep fake is formed. >> it is easy to make these. there were breakthroughs from academic researchers who work with this machine learning that would drastically reduce the amount of video you need. >> programs like fake app, the most popular for making deep fakes, need dozens of hours of human assistance to create a video that looks like this, rather than this. in august, researchers at carnegie mellon revealed software to accurately render not just facial features, but changing weather patterns and flowers in bloom.

this advance is not yet available to the public. with increasing capability comes increasing concern. >> this is fake news on steroids. we do not know of a case yet where someone has tried to use this to perpetrate fraud or an information warfare campaign or to really damage someone's reputation. it is the danger everyone is afraid of. >> in a world where fakes are easy to create, authenticity becomes easier to deny. people caught doing genuinely objectionable things could claim evidence against them is bogus. fake videos can be difficult to detect. researchers around the world at the u.s. department of defense have said they are working on ways to counter them. deep fakes have some positive uses. a firm that creates digital voices for people who lose theirs from disease. >> speech synthesis is the artificial production of human speech. >> there are applications that

could be considered good or bad like the many deep fakes that exist to turn movies into nicolas cage movies. >> oh hi, mark. nejra: that was just one of the many quick takes you can find on the bloomberg. you can also find them on bloomberg.com along with the latest businesss news and analysis 24 hours a day. that is all for "bloomberg best" this week. thank you for watching. i'm nejra cehic. this is bloomberg. ♪ .. ..

♪ carol: welcome to "bloomberg businessweek." i'm carol massar. jason: i am jason kelly. we are here at bloomberg's global headquarters in new york. carol: in this week's issue, the predatory lending machine crushing small businesses in the united states. jason: the shocking downfall of auto executive ghosn. carol: some stocks have lost over $800 billion since the end of august. jason: that is amazing.