Futures and negative territory for the first time on record. Air travel is floundering with carriers slashing services and grounding planes. Richard branson says the virgin operation may not survive. Today was big story the crash in oil prices. We have the wti futures settling at 37. 63 per barrel. You are taking a look at june futures at the moment. This of course still at a volatile level, but the real question being is will it suffer the same fate . Today, we saw the technical auditing exacerbating the price plunge away from the may futures contract ahead of the Energy Companies running out of place to store oil. U. S. Futures jumping 3 10 of 1 after they pulled back from a six week high. Quibi stocks under pressure. Jim. Ng us now is what was interesting in todays session was it a virgins we saw in the market. We had the price of oil collapse but at the same time, really not a lot of movement when it comes to the u. S. Stock market for the treasury market. Why are we seeing such divergence in the markets and will this continue . Jim it is pretty dramatic anytime you see you have people paying to actually offload their oil. When you see a negative price for oil, that means in order to deliver that oil, you have to pay someone to take it. The headlines are obviously interesting around that phenomenon, but it did not really affect the overall curve. If you look at june, july, deliveries further out, the curve shifts. It is mainly a technical situation. Some of the issues are they are running out of storage, so oil in the u. S. , wti crude is based on delivery in oklahoma. They are physically running out of places to put the oil. If you go down there and get paid 25 to take the oil, put it in the Swimming Pool and sell it in june and make a 45 spread. There are some rumors about big bankruptcies among large energy traders, especially out of asia. There were some positions being liquidated. If you put those things together, that is why you saw this unprecedented move. If you look at the real economy, the decline of the price of oil in one contract for may, that does not tell you about demand. I dont think this is really a demand story. If you look at the curve, it will rebuild as the economy reopens. That is why you see the markets with this really dramatic selloff in oil prices. Given that energy is still a chunk of the s p 500, not to mention the u. S. Economy, that the u. S. Is now the largest oil producer, theres a lot of jobs depending on the sector, highpaying jobs. Can there really be market stabilization and a sustained recovery if we dont have stable elation first in the oil market . Jim that is a really important question. If you go back 20 years, the u. S. Was a big player in the energy market. If you look at the resurgence of manufacturing in the u. S. After the 20082009 recession, a lot of that resurgence was to build up the infrastructure to support the oil and gas industry in the u. S. That emerged out of this fracking phenomenon. The development of technology to make worthless tracts of land in north dakota and texas become the most valuable properties in the world. The problem is those tracts of land, that process to cost about 10 times as much of taking a barrel of oil out of saudi arabia. Probably four to five times as much of extracting oil out of russia. That cost difference means unless the price of oil goes up in the u. S. , the Manufacturing Sector as well as the Energy Sector are at risk. I think you might see some policies out of the administration, especially in an election year, that are going to prop up the price of oil. There has already been talked about energy tariffs, which means if oil cannot come into this country unless it comes at a certain price. That would be very beneficial to the Energy Producers and Manufacturing Sectors, which the president is in order to win his election. It will be hard to recover in the u. S. And the Manufacturing Sector unless you have Higher Energy prices, but i think we might see some help from the admin initiation because it is definitely a politically sensitive topic. Whether you see that materializing, because we have been talking about when you get this close to the roll, it is better to look at the second month contracts which are holding up for june. Is there any expectations that the supply and demand overhang and levels of inventory we are seeing at the moment is going to show any improvement by the time we get to that contract . Jim the real question is whether or not the june contract is going to collapse the same way the may contract did. At june contract settled 2043. The may contract settled at negative. Theres a long way to go. Whats interesting is that it does take time to turn off these wells. Andwells are pumping feeding raw oil into the pipeline. And it iss going down taking time to shut production off. With that said, the fracking wells in the u. S. , the Energy Sector in the u. S. Is probably the most noble in the world. It is easier to take production offline here then it would be in saudi arabia or russia, the older field that does not have the technology the u. S. Has. Between now and june, a, quite a bit of production will turn off and that will keep a similar scenario from happening when we get to the june settlement. Interestingfind people who figure out how to store more oil and take advantage of the fact there probably wont be as much demand for the june oil as people may suspect today. If you do expand Storage Capacity and simultaneously expand, reduce the amount of oil showing up, that will keep what happened to the may contract from happening to the june contract. I dont think we will see this again anytime soon. This was a historic event, interesting event, one of the multistandard deviation events we will talk about. As we think through what is possible in the energy market. It is not likely to affect the june contract. Certainly interesting event to hear in asia. I want to get your thoughts on the broader bear market because even at the time we see recessionary conditions and expectations really jumping globally, we are seeing a number of markets jumping back into bull territory. Im curious about a lot of people are looking at the different types of recession driven shots right now. It is really an event driven bear market. What does that mean in terms of implications for how you position your Investment Strategy . Is the market fairly priced of the moment given that it is a shock to the system . Jim it is always impossible to predict the shortterm. If you look at other event driven shots if you look at 20082009, that was a systemic problem that we had bid there was just too much debt in every level, especially household going over and borrowing too much money. That was systemic and you needed to wait when you push out that excess debt. If you look at an event driven or the russia1 debt default in the 90s, generally, the underlying economy was in pretty good shape before you went into the event which means taking the right precautions, resolving whatever negative effect, that leads to a relatively steep recovery. While we are not going to get the vshaped recovery might have been hoping for at the beginning of this for a whole host of reasons, i think theres a reason to believe we are not going to see the low or touch the lows of this particular crisis as some analysts were suggesting. I think we have probably seen the worst from an equity market perspective. Does not mean we will not see a lot more volatility. Every headline that i see about it is negative. Bull market case has to be we have half a quick reopening and see earnings theyve allies. Even though the next two quarters are going to be abysmal, we saw that in the u. S. This morning with jp morgan earnings. I have to believe this also low Interest Rate environment coupled with government stimulus is going to drive Earnings Growth in the third and Fourth Quarter. If that happens, think the bulls are right. The bear market case, we stay shut down with containment measures lasting through the summer. We have permanent changes to the growth rate in the u. S. And europe, which means even when people can go to restaurants, they decide not to. Even when they decide to go to the office, they decide not to. Ceos making decisions whether or not to invest in new factories, they are more hesitant with what capital to work. Finally, the huge explosion of Government Debt is ultimately going to raise Interest Rates. With higher rates comes lower equity prices. The markets are fairly priced as is. If you really push me, i will tell you i think they are little stretched given the noise i see ahead of us. Shery despite the fact we continue to see pretty weak numbers on the economic front, we continue to go higher when it comes to equity prices. We have seen two weeks of gains already in the u. S. Market so where do we go from here . And how much does it depend on how soon we can really get rid of this virus impact . Jim i think it really depends on whether or not we can live with it because we are not going to be able to get rid of the virus impact unless there is a medical breakthrough like we get a vaccine in the next six months as opposed to the next 12 to 18 months. Or we find a credible way to treat the virus trade there has been a lot of fake news about. Drugs. Miracle drugs. We are going to have a slow reopening, 22 Million People that are likely unemployed in the u. S. Are not going to get their jobs back anytime soon. If it doesnt happen, it is very hard to see corporate earnings rebuild and actually get to a higher place than they were in the Fourth Quarter of 2019. I think it is difficult to see much more to the upside. If i look at to asia and i can see whats going on in china and korea and even whats going on in singapore and japan, but those countries are so further along in dealing with issues, especially china and korea who seem to have a very good approach to testing and tracing. Which means the probability of a resurgence of the virus has declined quite a bit in those countries. In the u. S. And europe, we can look at those models to keep resurgence from occurring here, then i think we have a chance of stabilizing. But if we dont follow those approaches, we dont test and trace and dont keep the virus contained, it is very hard to see that the u. S. Is going to be able to rebound even under the slower assumption that economists are putting forward. It is all about testing, tracing and doing what they have done in asia, bringing that here so we can reopen. Europe is going to go before us but it will be very difficult. Thank you so much for joining us. Wealth Enhancement Group cio jim cahn with us. An update from the reserve bank of australia. Interesting proposition to remove loan to value ratio restrictions. Essentially measures of how much a bank and loan in terms of a mortgage property. At this point, there is a 20 to do banks are permitted no more than 5 of the rate Residential Mortgage lending to these high lvr loans. Ones where you are seeing 20 or less than 20 of a deposit being provided. The rbnz is hoping to provide alleviation of pressures on banks proposing the removal of the valley restrictions in line with the Financial Stability mandate. This is going to be open to consultation. Lots more to come. This is bloomberg. Haidi you are watching daybreak australia. Lets get to the first word headlines. The role Health Organization is warning against virus optimism saying the worst may be yet to come. As countries around the world began to discuss how and when to reopen their economies. He says the crisis is not over and the worst may still be yet to come, saying many politicians and advisors do not understand the nature or the danger of covid19. Us, the worst is yet ahead of us. That many people still dont understand. , very developed, putting the wrong conclusions because they didnt know it. Haidi the city where the coronavirus was first reported is rejecting any role in spreading the infection around the world amid increasing speculation in the u. S. And elsewhere about the origins of the pandemic. Wuhans top disease laboratories denied the disease was liberally released, telling Chinese State media that patient zero had no contact with its staff. Singapore saw its highest number of virus cases, with infections topping 1000 for the first time. The figure was driven by illness among Migrant Workers and dormitories. Indonesia is proposing urgent Virus Testing with restrictions as infections more than quadrupled since the start of april. The indonesian death toll is the highest in asia outside of china. Shery u. S. Continues to see a slowing rate of increasing virus cases with the latest figures showing a rise of 2. 7 . Lets get an update on the situation from max, great to have you with us. We are seeing some Southern States taking steps towards reopening their economies. What are we seeing across the United States . Because it seems that cases, deaths diverge greatly among the west, east and Southern States as well. Statesah, so these are that are a little bit earlier in their curve and have tended to lag a bit in testing. Part of it is they generally did than you haveess seen in the tightly packed areas like new york, washington or california. The question that we will get an answer to in a few weeks as they start to open up his whether they generally genuinely did get the operates under control or whether they are being too optimistic and working off of data that is not necessarily reliable given testing. We are seeing in some other countries that with a Better Health care infrastructure, a better test and trace program, we are still seeing resurgence is. We will definitely get a quick verdict on whether those states are making the right decision. Max, testing and contracts theact tracing is something we have seen in asia, one of the first steps in mitigation strategies. Reopening,es to there are lots of conversation tapping about whether there needs to be more health data available. There needs to be clearly the consensus that there needs to be immunity, antibody tests. Are we any closer to seeing that rolled out in a widespread enough way where you can get confident that economies can reopen and people can go back out . Beginnings,e especially in the United States. The thing about serology testing, it is very easy to understand the appeal. You find the full extent to which the virus is spread. You get a sense of who had it and may be commute immune. The thing we dont fully understand and wont for some time to come is the extent to which a positive serology test means you actually have acquired immunity. That is for two reasons. We are not quite sure how accurate these tests are. The fdas mandate has been sort about speed than validation. That is for good reason, you have to get testing out there but it does have uncertainty. The second level of uncertainty is we do not yet have a good sense of how whether people are vulnerable to reinfection. How much that risk varies between people and based on the depth of their infection. When you think about the fact that potentially the majority of people who contract the virus do not show symptoms, there is the possibility they may not have stuff we dont know yet. Just underscores at this point in the pandemic how much there is still to be learned about the virus. Max nisen in new york. Plenty more to come on daybreak australia. This is bloomberg. Shery a quick check of the latest business flash headlines. Disney slumped after ubs and Credit Suisse lower the rating, saying its exposure to the coronavirus outweighs any gains from its move into video streaming. Ubs says profitability will be impaired for longer than originally, foreseen while Credit Suisse noted disneys lack of operational visibility. Disney theme parks are still shut down and is unclear when they may reopen. British billionaire Richard Branson is appealing for state help for his Beleaguered Airline and the u. K. In australia, saying they wont survive the coronavirus without it. Branson says he is doing everything he can to keep Virgin Atlantic and Virgin Australia in the air but needs funds to write out the crisis. Bresson says he will offer his caribbean island anchor as potential collateral. A lengthy list of companies declining to offer guidance, failing to give a fully revenue projection for the first time in years as it tries to assess the impact of the coronavirus. It says it cannot give a forecast until the pandemic recedes, despite the infection boosting demand for i. T. Services. It says covid19 will hit revenue by 5 to 10 this year. Lets get a quick check of how the markets are trading. We are seeing wti june futures gaining 1. 5 , holding about the 20 a barrel. This coming after wti may futures settled at 37 a barrel, plummeting into the red. The lowest number in data going back to 1946. In this trading session, we have seen it recoup some of those losses and now trading at 16 a barrel. When it comes to u. S. Futures, gaining 2 10 of 1 . Still above the 2800 level. We have seen u. S. Stocks pulling back from the six weeks high. The resilience in the u. S. Equity market has been pretty impressive given that we have seen this crash in oil prices. Same thing when it goes to resilience in the treasuries market. Small move up. That really applies to safety trade. This big divergence in markets. We are seeing kiwi stocks at the moment down 1 10 of 1 , haidi. We are just getting some breaking news crossing the bloomberg from bhp. The energy giant saying Third Quarter petroleum output reported just lower than estimates. Equivalent of Million Barrels. Weve got petroleum, iron ore and coal changed. Guidance