GM103: Why Optimism Could Be the Most Contrarian Trade ft. Pippa Malmgren

**Pippa Malmgren** (0:01)
I think this is one of the most profound questions of our time.
It's something we need to manage because the upside is so valuable. And the downside risks are very severe. But I think most people have the downside risk pretty well in their train of focus. And not enough people have the upside, which is why it's not only how I see the world, but I think it's important to add that to the repertoire of potential scenarios.

**Niels Kaastrup-Larsen** (0:32)
Welcome to Top Traders Unplugged. In markets, success doesn't come from predicting what happens next. It comes from being prepared for what you can't predict.
In each episode, we go deep with some of the world's most thoughtful minds in investing, economics and beyond to understand how they think, how they prepare and how they decide, and the experiences that shaped how they see the world. No noise, no short cuts, just real conversations to help you think better and invest with confidence.

**Niels Kaastrup-Larsen** (1:05)
Pippa, welcome back to the podcast and thank you so much for joining Jim and I today. For what I know will be a fascinating continuation of our previous conversation with you. I can't believe it's been more than four years since we last had you on. I'm so super excited about today and of course it was a real treat to meet you in person at Grant's event in Florida only a few months ago. So very excited to have you here, Pippa, how have you been?

**Pippa Malmgren** (1:30)
I am great and thank you so much for the invitation to come back and I'm really looking forward to this conversation and Grant's thing was fun, wasn't it?

**Niels Kaastrup-Larsen** (1:38)
It was amazing. It really was and well, I will say that you played a big part in me deciding to go all the way from Switzerland to Florida. So there we are. Anyways, now, Jim, I know you've been traveling. Hopefully the jet lag is not too bad, but if it is, I know that someone who could maybe share a pro tip about jet lag would be Pippa. So I don't know.

**Pippa Malmgren** (2:03)
My advice, don't get it.

**Cem Karsan** (2:07)
Honestly, the way back is always good for me. I find myself up at like 5.3 in the morning going for walks and getting work done.
So it's been a long day here already for me. I got up early this morning.

**Niels Kaastrup-Larsen** (2:21)
Good stuff. All right. Well, I want to start out not by going back four years. Actually, I only want to go back to our meeting in Florida a few months ago, Pippa, because you said many things that stuck with me. One of them was that you felt that the balance, or not felt, but you thought the balance of power within the US administration had changed. And if I remember correctly, you said something like, usually it's the Treasury that is kind of the top dog in the administration.
But now in this current administration, that had changed and it was now the, or it is now the Department of War. And I think that might also help frame the conversation a little bit today, perhaps. So am I right in remembering that? And what does that even mean for the US and maybe even for the world that change?

**Pippa Malmgren** (3:11)
Yeah, no, I don't think that's quite right because my view is right now we're, we're in such an extraordinary moment in history where the administration is recognizing there's a need for profound change because technology is forcing this change upon us. We will go into detail, but you know, Secretary of the Treasury, Besson has a very clear vision of moving the nation from its current financial system on to digital rails, to render the economy more visible, but also transparent and a situation where you can literally figure out where all the money is going, as opposed to where we are right now, where we have all these holes in the budget that nobody can explain. On the Department of War side, of course, it rises in priority when you're at war.
We are engaged in a number of foreign policy confrontations and conflicts. In fact, I argued there and I continue to argue now that the market is wrong when they look at each one on a one-off basis. They try to assess Ukraine on its own merits and Taiwan on its own merits and Venezuela. But in fact, they're sequenced very carefully and they are related. It is all about creating the conditions to finally arrive at a peace deal in Ukraine, an accommodation on Taiwan, a rapprochement between the superpowers. There are many who will disagree with that objective, but that is the objective under this administration. The Treasury is playing a materially important role in supporting that process. And you'll hear Scott Besson talk about, you know, cutting off the access to funding for the IRDC and Iran before the military action began, so that they would be destabilized already. So there is a clear interaction. They are all rowing in the same direction.