Baete, who took over the European financial services giant last year, was in New York yesterday and spent more than an hour with Susie Gharib and me spinning out his thoughtful but grim view of the world’s financial plight. Ballooning financial derivatives, he says, have created a huge class of people who make their money off of volatility, and therefore are determined to feed it. “There’s a disconnect between the real economy and the financial economy,” he says. Instead of real events driving financial events, the process has reversed, with “derivative markets driving cash markets which drive the real economy.” He cites the wild swings in the stock of mining firm Glencore “as a fantastic example.”

“We have always believed that having deeper financial markets is a good thing,” Baete said. “We now know that is no longer the case. The world’s smartest people are spending their time thinking about one thing: How do I increase volatility?”

Baete says the problem is exacerbated by massive pension funds trying to satisfy unrealistic return expectations, driving them to risky assets. “You just have to wait for the day of reckoning, when everyone realizes the emperor has no clothes.”

He expects this week’s volatility over Brexit to move on to the next target – the Spanish elections, Greece’s problems, the U.S. election, and so on. “Too many people are too well incentivized to increase volatility.”

And how will it all end?

Most likely, he says, with another financial crisis.

What will that crisis look like?

“The only thing I know is it will not look like the last crisis.”

Enjoy the day. Grist for the volatility mill below.

Top News

• Trump’s Travails

Donald Trump fired his campaign manager Corey Lewandowski in an apparent reaction to recent polls showing him trailing badly behind Hillary Clinton in the expected general election showdown in November. Lewandowski had championed the “Let Trump be Trump” approach that had demolished his establishment rivals in the GOP primaries, but the presumptive nominee has come under pressure to tone things down in order to lure swing voters away from Clinton. Trump’s problems are also visible in his fundraising efforts, with Clinton raising more than twice as much as him in May: $42 million compared to $18.6 million. The Republican National Committee, which Trump says he is counting on to provide much of his general election operations, started June with only $20 million in the bank, compared to $60 million four years ago when the party was backing Mitt Romney.  Fortune

• I Like You, But Not Your Friend, Says Cook

Apple may not support Donald Trump's bid for the presidency, but it's not cutting its ties to the Republican Party. Apple CEO Tim Cook plans to host a fundraiser for House Speaker Paul Ryan on June 28 in Menlo Park. The news comes just a few days after Apple reportedly decided against funding or supporting the Republican Party's convention in Cleveland. Trump's inflammatory comments about topics like immigration, Islam, race-relations, and women, were apparently too controversial for Apple to go near. Additionally, Trump had sided vocally with the FBI in its fight to unlock the iPhone of one of the San Bernardino shooters, calling on customers to boycott the company’s products until it cooperated.   Politico

• Germany Finally Probes VW Top Brass 

German state prosecutors confirmed for the first time that they are investigating the former CEO of Volkswagen, Martin Winterkorn, on suspicion of market manipulation by concealing the scale of its diesel emissions problem from investors. According to media reports, VW’s ex-brand head Herbert Diess is also under investigation. VW has consistently denied that its top management knew about the cheating that wiped 30% off the company’s stock value when the EPA and CARB exposed it in September after months of intense discussions. Board chairman Hans Dieter Poetsch, who was chief financial officer at the time, isn’t under investigation, prosecutors said. Separately, VW’s new CEO Matthias Mueller appeared to signal a move away from diesel engine technology, saying that the regulatory pressure to produce cleaner engines is making it “extremely complicated and expensive.” He declined to say whether VW would ever market diesel vehicles again in the U.S. Fortune

• Modi's Answer to the Rajan Problem

India’s Prime Minister Narendra Modi sweeping reforms to rules on foreign direct investment, opening up its defense and civil aviation sectors to complete outside ownership and clearing the way for Apple to open stores in the country. Apple is expected to be a beneficiary of a three-year relaxation India is introducing on local sourcing norms with an extension of up to five years possible if it can be proven that products are “state of the art.” The new reform measures also relax restrictions on inbound investments in pharmaceuticals and single-brand retail. The move came two days after central bank governor Raghuram Rajan, a darling of financial markets but unpopular with Modi’s party and its friends in big business, announced he would not seek another term. That surprising move that raised concerns about whether reforms he set in motion will stall.  Fortune

Around the Water Cooler

• China Is Only Hacking U.S. Companies to Steal Government Intel Now

China appears to be abiding by the promise it made in September to stop supporting the hacking of American trade secrets for the benefit of its own companies, according to cybersecurity firm FireEye. FireEye’s Mandiant unit in 2013 famously blamed a specific unit of the People's Liberation Army for a major campaign of economic espionage. But in a report out Monday, it said that breaches attributed to China-based groups had plunged by 90% in the past two years. The most dramatic drop came during last summer’s run-up to the bilateral agreement, it added. FireEye’s new CEO Kevin Mandia unsurprisingly took as much credit as he could, claiming embarrassment following its 2013 report was a big factor. Victims of Chinese hacking had included U.S. Steel, Alcoa and Westinghouse. Analysts say hacking of businesses still continues, but rather as a stepping stone to government and military intelligence, which is still fair game under the agreement.   Fortune

• Read it and Weep

The proportion of working-age men dropping out of the labor force in the U.S. is higher than in any other advanced economy in the world except Italy, according to a report from the Council of Economic Advisers. Between 1990 and 2014, the participation rate of ‘prime-age’ men (between 25 and 54, when men are at their most productive) fell from 98% to 88%. That’s the third-lowest in the OECD. As you might expect, the figures are even worse for those with lower skills. Only 83% of those with a high-school degree of less are now officially in the labor force, and a third of those are living in poverty (often because they can’t find a job when they get out of prison).  CEA

• Meanwhile, Back in the Real World

Google has opened a new luxurious HQ in London with free gourmet food, a running track and sofas that cost more than a car. The curious thing is that this is all to pamper employees who contribute next to nothing to the bottom line, if the company’s tax filings are to be believed, despite generating over $7 billion a year in sales. It’s only a few months since the company agreed to pay the U.K. a paltry 100 million pounds in back taxes on 10 years of profits (and another £33 million related to stock option awards), after an uproar over the way it shifted profits to lower-tax jurisdictions. France is looking to get back ten times as much.   The Times, subscription required

• Tencent's Bid for Dominance in Online Gaming

Chinese internet giant Tencent Holdings (with some partners) is about to pay a jaw-dropping $8 billion for a majority stake in Supercell Oy from the company’s employees and from Softbank. The deal values the Finnish-based game developer at over $10 billion, according to The Wall Street Journal. Supercell is best known for ‘Clash of Clans’, which was the world’s highest-grossing mobile game by revenue last year, grossing $1.35 billion. Tencent already owns the world's highest-grossing PC game, 'League of Legends', through its 2011 acquisition of L.A.-based Riot Games Inc. For Softbank, the deal will further whittle down its $80 billion debt pile, after the disposal of nearly $8 billion in Alibaba shares last month.  WSJ, subscription required