I have to go to the gossip of london. We will get to oil with jim caron in a moment. Why does the sunday times go after the Prime Minister of the United Kingdom when he is just out of the hospital bed . That is a very good question. First of all, lets remember the sunday times and of good the times were huge supporters of mr. Johnson. There is a feeling that the fact the Prime Minister got sick maybe gave him a free pass in how he handled the situation. There are two schools of thought. One thing, we just need to get through the crisis and need to try to work together. And then those who say we need to hold our leaders accountable for what they have done because theres the change of course. Yesterday we found out the critical number of personal Protection Equipment that was data for the nhs will not arrive in time. This after the scathing article that is basically saying Boris Johnson was pretty much thinking of other things instead of dealing with the crisis in february and march. I dont know if you change the trajectory, but as a member of the press, i think it is right to give people into account whether they have been sick or not. Tom a little bit of light, folks. Of look at the statistics these diseases and i guess there is improvement on this monday morning. We have an improvement and that is our news. From new york city. We begin with white house next atic leaders on the bill that includes more money for the Small Business loan program plus funding for hospitals and testing. The trump administrations trend of free up cash for businesses hit hard by the coronavirus. It will allow importers and manufacturers to delay tariff payments for 90 days i many overseas products. But the move does not stop ongoing punitive tariffs. They are the centerpiece of current u. S. Trade policy. The worst mass shooting in canadas history, authorities in nova scotia sing a man dressed as a Police Officer went on a shooting rampage and shy people in their homes. He also set fires. 16 people were killed. The gunman is dead. The price of oil fallen to its lowest in 21 years. Tom and francine will have more on that. There is concern the world is running out of places to store oil. Those output cuts have not been enough to cope with plunging demand. Global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Tom thank you so much. I went to get to the data pretty quick. Futures deteriorate. The vix goes back to about a 41 level. A little bit of angst in the last 20 minutes. You see with the yields coming in. Oil is nothing but spectacular. On the hour mark, west texas plunges another level, seller a solid 13 handle. Francine . Francine as wti futures have tumbled, it is basically opened up almost nine dollars a barrel to the june contract which with most trading has now transferred. The features changing. Fires in texas offering as little as two dollars a barrel for some of the oil. Raising the possibility that american producers would soon have to pay customers to take root off their hands. That is the story of the day. Oute trying to figure earnings. European stocks that were off but are pretty much flat slightly in the red, tom. Enoughreally cant say about the bloomberg terminal on the cell phone. I love, love, love this views. Love the speed of use. The june futures coming in as well i believe with a 22 handle on it right now. With jim caron working in fixed income at Morgan Stanley, we would start with the bigger view but because of oil, i can do that today. I have to go right to the Morgan Stanley view linking debt into hydrocarbons as well. Jim, youre just old enough to remember midland, texas, and the collapse of the 1980s. There up and other issues on oil over the years. This time seems to really be different. How difficult will it be for the debt of oil . Be very it is going to difficult. That is what the highyield records are effectively reflecting. E are seeing that that justproblem continues to get worse. We know the origin of a clearly, it is a Global Demand story. Demand is falling. There was a spat between the saudis in the russians and that made things worse. But this also puts into context inflation. If you look at breakeven, tenure breakevens for example, those plummeted. Last week they were up 130 basis points. About 102. Are that means peoples Inflation Expectations have fallen on average over the next 10 years by about 0. 3 because of this. Some is technical and some is fundamental. The other technical out there is they are running out of storage. Youre running out of storage just or oil. You have what you need right now, might have missed have less demand and that drives prices down. But as you pointed out, tom, this has farreaching applications to fixed income. Highyield is not going to do so well with this today. Investmentgrade Energy Sectors are not going to do so well with this today. This has been a soft spot for the last year to 18 months. It will just make matters worse. Tom right. One of your great terms is not only do you look at the strategy of this and the management of portfolios, but you look at the supply coming on. Very few do that. How will this of let affect the supply of fixed income . It really becomes very idiosyncratic. If you look at supply a fixed income if i just look at investmentgrade supply it is running a very strong levels ahead of even 2000, 2000 19 levels. Yields are low. There was an opportunity to issue in january and february but even more recently right now is the markets have started to heal themselves a little bit, there is been plenty of need to issue. So low Interest Rates helps people issue. Heres the problem. Youre helping all the wrong people in the wrong places. The people that need the help our in the Energy Sectors, the more stressed sectors, not the structures that are healthy. Sectors are getting the benefit of low Interest Rates. Spreads are wide, but still. The money is not going where it needs to go to really support the more troubled sectors. Is it right, jim, are we going to see bankruptcies because of this . Andld we support Companies Sectors that were in trouble before coronavirus . Are we going to end up with a bunch of Zombie Companies . This is a really good question. I want to discuss the difference between bankruptcies and insolvencies. Will we have bankruptcies . Are there some companies that just cannot stand this at this point and are just bad operations that are just operating it way too high of a cost . Yes. Yes, there will be some failed companies along the lines. What is more important to think about our the insolvencies. These are still ongoing concerns that are going through a rough patch and really just need a line of credit to get through this period of time. Sort of like having a credit line. This is where the fed could be helpful. This is where centralbank policies could be helpful. Insolvency is your ability to not make good on your debt for the time being. The problem is a lot of these companies in the Energy Sector have already gone through their lines of credit. Where you going to find a bank that is going to lend a lot of money . What we maybe need to start to think about are some of the Better Companies in the Energy Sector that the fed and centralbank policy might need to start to address to say, look, just like they are doing with the investmentgrade market is to say, we will give you a bridge loan to the other side but only for the companies that as of march 22, that is the line they draw in the sand, you know, better orng of x or whatever metric they want to use. But that is the kind of thing we need to start to think about. Look, oil is in a freefall. These companies are not profitable at these prices of oil. The longer they stay here come the longer the pain will be. That could create other financial problems. Francine jim, is there worry that we are letting some of the Weaker Companies go, that leads to a spike of about 100 in four or five years . Are we creating this crisis . Boombustalways a business. The oil the whole problem with opec was to try to smooth that out. Opec is not working very well anymore. I like where youre going with this in the sense that before opec, that is exactly what you had come oil would run up to really high prices and a lot of people would come in and somebody the mask produce or the major producer of oil would produce a lot and they would drive prices really down and people would go bust. Oil has always been a bit of a boombust type of a product when you did not have a governor effectively like open that was running efficiently. Right now it does not seem like we have the School Monitor on duty at this point. It is running amok. We have to get used to that. Future,continues in the having oil go hundred 10 a barrel, to 50, 60, 70 then come back down. It is a boombus business. Withine we will be back jim caron of Morgan Stanley investment management. Also coming up at 3 00 p. M. , london time, conversation with larry kudlow on how to get americans back to work. He is National Economic council director. That is 10 00 a. M. New york, 3 00 p. M. , london. This is bloomberg. Francine this is bloomberg surveillance. We were having a great conversation with jim caron about some of the oil companies, maybe some of the funding crunches that they will face, what this means for banks. And ask yougo wider in general, do we understand once the economy is open again, once we have a handle on this health crisis, with a Lasting Legacy of the 2020 recession will be . Of the things that has become very clear and we are already seeing the wheels in motion is the use of technology, working remotely. I think these are obvious. This is something we are all doing currently right now. As it turns out, people are pretty good at understanding their systems and getting things to work and i dont think a lot of productivity is being lost. But i also do think when we think from a macro perspective is it is going to be a pretty big change in terms of supply lines, in terms of where things are produced, and also wages and labor costs. There are two ways to go on this. One is to say the initial impact is at were printing a lot of money, during all kinds of quantitative easing, neck rates a lot of money and might create a lot of inflation into the future. Others might think, no, theres going to be a lot of demand disruption over a period of time where youre not really going to have inflation but disinflation or even a deflationary period before you resume. This is the battlefield. We dont know from a bond perspective in terms of where should the long end of the yield curve go, how much inflation should we be discounting or not. That is the big question mark in the bond market. Where i start to lean towards this is, as i look at not only the amount of physical deficit spending that is been going on not just in the u. S. But around the world, but if i take the u. S. , for example, and see what we have been spending just for the virus, at that too dont forget, this deck it is the decade the baby boomers all become 100 eligible for social security. The deficit was going to rise anyway. Not only do we have this big deficit spend which was very unexpected, but we have another one coming in the years 2024, 2026 that will add even more to the debt. The question then becomes, the dollar, which in bond yields that have been in the secular decline for 40 years, does the very high levels of deficit im talking eight percent, 9 , maybe higher does that start to matter or do we start to think differently about deficit because other countries are going to be the same position as well . These are key questions that we need to wrestle with. Them foreems like a 2020. We will do that withe him karen. Thank you so much for joining us today, jim caron. For those working at home, particularly those with the terminal, i cannot say enough about tv. Us. Se stay with this is bloomberg. Tom bloomberg surveillance. Lets get right to it. This is too important of a conversation. There is a lot of confusion, joining us now Senior Vice President hydrocarbon confusion from bloomberg, julian lee. We are thrilled he could join us. Writing brilliantly on the dynamics of oil. Physical you dont buy oil when you get those price quotes, particularly within etfs, you buy a may contract, which is rolling into june. Thursday,ce of oil 13, 40 a barrel, or is the price of june contract 22 or 23 a barrel . Where will that be thursday or friday . I think thursday or friday were going to see it somewhere probably between the two, but i think it will be closer to where the june contract is now. Barrel is the 22, 23 a level. A lot of what we are saying in the headline price right now is because the may contract expires tomorrow. I think that is pushing the price down because if youre holding paper, either have to offload it or you take delivery of the crude and nobody wants the crude at the moment. Tom this is so important. Were talking about physical versus financial contracts and agreements. Own an etf and i mortgage the house because oil 14 dollars, 15 a barrel, am i going or profit mightily from the future shift . Well if youve got a rollover on that contract ended june. This is part of the issue that we are seeing at the moment and some of the bigtime spreads that we are saying. By who are buoyant theng oil now, selling crude forward on the futures market, locking in profit and that is allowing them to store the crude or to move the crude if you physical crude, to move that around the world, locking in a profit as you go. Tom one final question, julian. Away from the dynamics of futures is just the bet on demandsupply demand of oil. How far out do you perceive this demand crisis of oil . H, juneish, or unimaginable . I think theres is a real fear that it is unimaginable. But that may be too strong. I think theres a real fear it is beyond june. I wrote a column over the weekend looking at traffic congestion. What were saying even in china were some of the restrictions are being eased, were seeing a pickup in traffic close daring peak weekday hours. People going to and from work. But what we are still seeing is that outside of those hours, at the weekend, during offpeak weekday times, traffic flows are really, really low. Discretionary recreational going to the shops kind of driving is not coming back or at least, not yet. Flying may be the same. Francine thank you so much, julian lee. Tom, as he was saying, it is very important to look at what is been going on with the futures contract and some of the conundrums as we try to understand the oil market and much more. This is what wti is doing now, i believe it is below 15 a barrel. A lot of volatility today. There may be volatility tomorrow because of the change of futures contracts will stop are also looking at earnings. This may give us that are idea of what we do next in terms of exit ease. European stocks were getting some 1 at the open. They are now down 0. 4 , following asia lower and following futures in the u. S. , tom. Tom very, very interesting. A lot of the earnings are industrial away from the Bank Earnings we saw yesterday in that important interview with mr. Gorman. Right now we want to drive forward to what were going to be doing for the rest of this hour. Gideon rose, Foreign Affairs magazine. Onir new issue is very much climate change, be pushed to the side but im sure gideon rose to the essays we have seen in Foreign Affairs have some terrific perspective on the International Relations of this pandemic. Please stay with us. Historic day for oil. This is bloomberg. Viviana lets get your first word news. We begin with the deal that is close on the coronavirus. President trump has joined Democratic Leaders and some members in his Administration Working on a new package that will provide up to 500 billion. More money would go to the loan program for Small Businesses plus hospitals and testing. Now to china, the nation adding stimulus after the economy shrank for the first time in decades. Thanks cutting borrowing costs. The government promising to sell another 141 billion in bonds for infrastructure spending. Vice president mike pence will discuss today testing shortages with u. S. Governors. President donald trump says some governors are relying strictly on state laboratories. He says they should also turn to large commercial and academic labs. Governors above parties are calling for more widespread testing. They say without it, they cannot start to reopen the u. S. Economy. In germany come the last 24 hours, the number of coronavirus cases rising this month by the least. Since april, since april 1, the number of for tallies is also the lowest. Germany will begin allowing smaller shops to resume regular business and schools will gradually reopen. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Thank you so much. Greatly appreciate that. I should point out again oil is south come even further. Contemplating a 12 handle on west texas intermediate, 13 and change right now with no sign of a bid. What you need to know stuck at home is you are bored, run out of things to read. This is what you need. I cant say enough the value of Foreign Affairs magazine. Their new issue is on climate change, clearly done before the pandemic set in. Ive already read the wonderful article by professor pei of claremont, his article on china. All i can say is if you go to their website, you will get the new issue, which is an app endemic. Leton rose, ambassador hoss off your many essays on the pandemic. What is the thrust you see from the council on Foreign Relations and from Foreign Affairs on this