A couple of points here as we seem to looking at the Luftwaffe capabilities with the aid of our infamous "retrospectroscope".
1. In 1939/40 what nation/s had long range escort fighters in service/production or even prototype form aside from twin engine machines?
2. What Nation had more long range bombers in service than Germany in 1939/40?
Long range being relative, what was long range in 1939 was NOT long range in 1942/42. He 111s could hit a good part of England from bases in Germany and could hit Northern Ireland once bases in the low countries and France were obtained. How much more range was needed for strategic purposes in 1939/40? 1941 starts to change things.
3. What nation didn't believe that the bomber "would always get through" without escortsin 1939?
To fault German thinking or planning in 1938-39-40 (first 1/2) when just about every other nation thought the same way seems to be using the "retrospectroscope".
Exceptions can be found, like American bombers, but then the Americans were faced, in peace time, with buying a few really long range bombers or lots and lots of shorter range bombers to cover the same area. It is 2565 miles from San Francisco to New York (or almost 1200 miles from Miami to Panama) and only 1737 miles from Dublin to Moscow. American requirements for simply deploying aircraft were far different than European nations.
The predecessor of the Luftwaffe had conducted bombing raids using Gotha bombers against British targets during WW1 and were well aware that bombers could not avoid serious losses without escorts.
See here:
http://www.dtic.mil/dtic/tr/fulltext/u2/a280686.pdf
Indeed that is why the Luftwaffe actually sent escorts. Furthermore without escorts an attrition strategy against British aircraft is not possible either. Yet the Luftwaffe was in no ways prepared for this.
Germany spent 7 years preparing for a land war with France and to a lessor extent Poland, Britain spent 7 years preparing for air with Germany. Britain was able to put far more time and effort in to a more focused objective.
In 1933, when Hitler was elected to the Chancellery, German armed forces were so weak that either Poland or France alone could have defeated Germany in a matter of days. Poland had a dictatorship under Beck, some bodies within Poland wanted to take German territory to Berlin as they regarded it as theirs, Germans within Poland had their land repossessed and redistributed to Poles and there were about 4000 murders of ethnic Germans during the interbellum and many simply had to leave. I don't want to exaggerate this as there were many reasonable people of Goodwill in Poland but the Germans did have legitimate defense needs and fears. In todays Eastern Europe, in Putins Russia there is a fear of reanexing Finland, Estonia, Lativia, Lithuania and the Ukraine now? There was a similar situation within the German region of Sudetenland within Czechoslovakia meanwhile France could at a whim invade and demand further payments under the Versailles treaty or even to annex territory as she had tried to do in the years after WW1. This sense of economic, ethnic, military, territorial vulnerability played upon Germans fears. Not Hitlers fears, not Nazi fears but German fears.
The strategic situation of Germany is that it is surrounded and its sea and trade access is easy to cut of. I would say it is obvious that in any conflict that involved a simultaneous east west attack, a highly likely scenario, German forces must be able to handle this. Moreover the defenses must be in Breadth not Depth to avoid any significant penetration of German territory, since the country is small. Since any conflict that goes on for any extended period becomes a war of attrition and blockade and favors the enemy. The solution to that is to have enough flexibility and speed of reaction to knock out at least one opponent before the advantages of attrition inevitably cause a German collapse.
This is the 'paradigm' German military planners intrinsically prepared for irrespective of Hitler. They did not plan on world conquest, they did not plan on invading Britain. They didn't have even a single amphibious landing craft in service, they didn't have any long range aircraft to support a maritime war against Britain. They didn't have long range fighter escorts. They abandoned the Junkers Ju 89, which would be madness if a war against Britain was contemplated considering the ease with which it was developed into the Ju 90 airliner and then the Ju 290 transport and by a roundabout path back to bomber.
This is the situation for the German Military, now its time to bring up Hitler. What did he tell the High Command to prepare for?
Nothing specific as far as I can tell. Mein Kampf includes clear references to expansion in the East. Stalin had Mein Kampf translated, the first translation in fact and was not alarmed. Hitler must be dumb to reveal his plans, right? However as ex Soviet Intelligence analyst Viktor Suvorov points out Hitler was speaking in terms of a process that would take hundreds of years. Hitlers first exposition of his aims were in what is now known as the November Speech (November 1937) just after Mussolini's visit. He left Goering surprised and dumbfounded, ie the leader of the Luftwaffe had no idea of what was coming. Hitler said that he saw himself as the savior of the German people, he saw them under threat, and to, in view of the fact that the French, British and Russians people had occupied much of the planet, would need to be able to defeat France, neutralize Britain and Occupy Western Russia. But these were not specific plans, with a specific timetable and sequence they were general objectives.
When war broke out in September 1939 the German armed forces were still in a state of building this fundamentally defensive strategy against its neighbors: what Hitler had said would make no difference because the precarious German resource situation meant diverting resources for such things as a long range air force was a folly.
By 1938 Britain was well on the way to replacing its out of date multi-engine biplane bombers with multi-engine monoplane bombers. Britain was armed to the teeth with a well layed out plan for expansion that had been put in place by Chamberlain.
Why did a Heinkel He 111P have enough range to reach Britain? Simple, because the He 111 was essentially an airliner. It was a Douglass DC2 with gun ports and liquid cooled engines and aircraft of that type have that kind of performance. It lacked a rear turret.
At the outset of the WW2 (September 1929) RAF strength was
1 266 Hadley Page Hampton.
2 6 squadrons of Wellingtons, which in my estimate would be 120 Wellingtons given RAF squadron sizes and aircraft held in reserve.
3 Slightly more Armstrong Whitworth Whitleys of which 205 had been delivered by July 1939. This was an aircraft specifically designed to be a night bomber, a role it was very effective in.
I would assume at least 150 would be in front line service.
So that's about 500 front line twin engine medium bombers.
The Hampton was not inferior to the Dornier Do 17, the 230mph Whitworth Whitley was not inferior to the contemporaneous 250mph Heinkel He 111P and had a better armament layout. The Ju 88A1 barely saw service and was still riddled with teething problems till the Ju 88A5 (the A5 preceded the A4). The Vickers Wellington was the finest bomber in the world at the time and unlike the German bombers had a tail turret with superior armament.
The Fairy Battle (over 1000 in service) was faster than a Ju 87 Stuka, could fly further, could also dive bomb, though not vertically and could unlike the Ju 87 level bomb with a string of 4 x 250lb bombs. During the Battle of France Battles took out Bridges over the Sein by level bombing from low altitude. The Battle was no more vulnerable than the Stuka. Over 1000 were in service at the outset of WW2 and like the Vickers Wellesley it had a range of around 1200 miles. Enough to strike Germany from Britain, the reverse can't be said for the Ju 87.
There were 16 squadrons of Bristol Blenheim's Mk I by 1938 though by 1939 they had been replaced with 9 squadrons of Mk IV of which 6 were bomber squadrons.
It's worth also noting the precarious economic situation of Germany in 1939 which limited any expansion of the Luftwaffe. In practical terms the Me 109E was not suitable for mass production. It had been designed around the concept of jobbing of sub assemblies to jobbing shops and various subcontractors. This while clever to a degree it also severely interfered with implementation of truly efficient mass production. That wasn't achieved till the redesigned Me 109F series. The spitfire wing was notoriously difficult to produce but once large scale presses were introduced it was as efficient as anything could be.