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Lawmaker stock trading: ‘A lot of them don’t file those trades within 45 days,’ Iris co-founder says

Iris Co-Founder Christopher Josephs appears on Yahoo Finance Live to talk about how the investing app tracks how lawmakers trade and lets you share your portfolio with friends.

Video Transcript

AKIKO FUJITA: Momentum is growing in Congress to restrict stock trading for lawmakers, with Republican and Democratic senators introducing competing legislation. The bill introduced by senators Jon Ossoff and Mark Kelly requires members of Congress to place their stock portfolios into a blind trust once they take office and comes with stiff fines for those who violate the rules.

Let's bring in Christopher Josephs. He's co-founder of Iris. Chris, it's good to talk to you. We should mention, Iris is an app that lets you share your portfolio with friends. Because of that, you can also track the portfolio of some lawmakers too. And I'm curious how you look at this debate that's playing out over in DC.

You've got some visibility on some of these portfolios. How much transparency is there? And how important is it, you think, to have this kind of rule in place?

CHRISTOPHER JOSEPHS: Yeah, I think it's fascinating to see, just the movement and the momentum that's kind of taken off. It started originally with Pelosi back in 2020, where she started making some solid bets. And then some of the laws started following those bets. It started with Tesla. And then it started moving to Apple and the big tech, Nvidia recently with some government contracts.

And the issue, though, with these things is, per the Stock Act, politicians have 45 days to file their trades after they originally file them. And yes, that adds some transparency and some sort of clarity for everyone to start following them. But a lot of them don't follow it.

Unfortunately, a lot of them don't file those trades within the 45 days. And the fine for that is only a $200 fine. It's ridiculous that these politicians are allowed to trade individual stocks and do this freely and in front of everyone while my friends in New York that are associates at banking jobs can't. It's ludicrous. It's sort of hypocritical. And it's good to see this kind of taking center stage.

ZACK GUZMAN: Yeah. And I mean, obviously, there's a lot of interest in some of those too, as you guys are doing, as some others in the past have done, tracking the trades that are meant to be reported there by a lot of these leaders in Congress, including Nancy Pelosi, one of the ones that I think gets most targeted due to, I guess, her outperformance in the market as well. I mean, how do you kind of break down some of that?

CHRISTOPHER JOSEPHS: Yeah, I think it's twofold. It's one, obviously, she's the most well-known name. There's other people that are better than her on the right and the left side. But it's Pelosi who's a very polarizing figure, unfortunately, in today's world.

But a part of that though, is just the trades that she's making. Back in 2020, she filed that she bought Tesla. Since then, it's up 60%. She bought Roblox at the IPO. It's up 60%. Nvidia, even just bought it back in June, it's up 75%.

So us retail investors, we thought, if this is happening in front of us, there literally should be no reason why we cannot only track these things but also buy them when she buys them. So me and a couple of buddies on the app, we've been starting to follow this strategy. And it's been working out tremendously.

I bought Tesla when she filed it. And I'm doing well. Same with Roblox, same with Nvidia. And the calculations that we did for 2021, she returned around a 45% increase in her portfolio, which beat the markets around 15% to 16%. So if she can do it, why can't we try? And why can't we follow it too?

AKIKO FUJITA: Chris, you pointed to the lack of enforcement and also the limited fines that don't necessarily compel lawmakers to follow the rules. This new legislation that's introduced by Senator Ossoff would essentially have a stiffer fine for lawmakers that amounts to their entire congressional salary. I mean, how far do you think that goes? Is that the kind of fine that's needed? Or does it need to be even higher?

CHRISTOPHER JOSEPHS: Yeah, I mean, it's a great question because take Pelosi. And I know you like to use her for an example. But her net worth is around $110 to $120 million on a $220,000 salary. $200 to these people, even making $220,000 for the rest of them, is chump change. It's literally nothing.

I don't really know exactly. I haven't thought too much about how severe the fines should be. But it should be taken seriously. And they should be held to the same standard as everyone else. The laws are for thee and not for me, it couldn't be more evident and more clear in a scenario like this. And it's a shame that they've been doing it for so long. But it's awesome to see Republicans and Democrats on both sides starting to push laws to kind of regulate this and make this more fair for the everyday people.

ZACK GUZMAN: Yeah. And I guess, kind of shifting away from Congress and using Iris for that, obviously it's been popular with a lot of people, because it really gets to the heart. I think it's a genius idea to kind of let other people track what you're doing so you can do it with friends and maybe point to, look, how I've been doing it. You can copy my trades that way if you want to.

I mean, what kind of growth have you seen? And really, I guess, who does this appeal to you most as you build it out?

CHRISTOPHER JOSEPHS: Yeah. It's been a wild ride, especially during the markets with GameStop and everything. But it originally started out as a scenario that I'm sure we've all been a part of. We're all in these group chats. We're all talking with buddies left and right. And you always have that one friend that tells you to buy, buy, buy. But you know he's not that good.

So you say, hey, I don't want to follow you. I can't prove that you're not good. But stop talking to me. And you have that other friend that is very quiet, but he's the one that's making these solid plays. And you go to him, it's like, stop making trades without telling me.

So we thought it was a cool idea. It's like, let's just add a social arm to all these brokers. So Iris lets you kind of connect your portfolio. And you can not only follow your friends' trades and portfolios in real time, but the more important and the bigger picture thing that we're trying to do here is, these newer investors, these ones that don't have as much conviction and as much experience, can actually follow high-performing investors based on their actual portfolio performance.

So COVID brought this whole boom for retail investors. But responsibility and education didn't really follow suit with it. We're trying to create a comfortable and not necessarily an overwhelming platform for these newer investors to connect with these higher-performing investors and help them navigate the crazy waters and the crazy emotional roller coaster that are the markets.

And it's been awesome. We launched back in September 2020. We passed around 100,000 users. We have millions and millions of dollars of assets under management. And we're going to start really unlocking and really capturing the true sense of what it means to be a retail investor and the data around that.

We obviously don't sell any of the data. People come to us. They want to buy it. And we say, no way. And what we're going to be doing in the future is we're not only going to be creating more prominent lawmakers and more prominent public portfolios so that people can also see these things, but pair that with the analytics and actually show the world what retail investing is buying and also that we're a lot better than people think.

We've been called dumb money forever. I think the tides are changing. And we're excited to see what the future holds for the retail.

AKIKO FUJITA: Yeah. Chris, this just feels like a natural progression from what we've been talking about over the last year, the growth in retail investing. You mentioned the numbers that you have in terms of users. How much of that have you seen kind of slow down as we've gone onto sort of the end of the year? I'm thinking back to one year ago when we were at the height of this discussion with GameStop. Have you seen that momentum continue, or have you seen a bit of a pullback?

CHRISTOPHER JOSEPHS: Yeah. It's very interesting to see kind of the growth with the way that the markets work. What we've seen is the growth hasn't stopped. It's tremendous. It's done, consistently, thousands and thousands of users every week.

But the interesting thing is, Gen Z and Millennials-- I'm 26. And what we do and what we grow up on is you invest in what you know. So all of us, we're all investing in the most popular stocks, Tesla, Facebook, Apple, a lot of these even smaller ones like Roblox and Disney. But the point I'm trying to make though, is retail investors, the newer generation of us, we all invest in things we know and the things that we know are these high-growth, high-flying tech stocks.

I'm sorry, but we're not in love with the Morgan Stanleys and the JPMorgans, the Berkshires, which now, as the markets are kind of shifting and interest rates are rising, those are honestly, the better investments to be in these days. And we've seen that clearly with high-growth 50% off their highs.

So it's been interesting to follow the activity of what we've been doing based on people and the assets that they own. But I do think that the growth is going to continue growing, not only because of the awesome products-- Robinhood is just an amazing company that has brought so much good. I know they get flak. But the more people that get into the markets, the better off we'll be 20 years from now, because the number one--

Buffett says it best. It's don't bet against America. So the best time to be in the market is now. And the best time to be before that was 10 years ago. So it's better to start and go through the growing pains than it is to not start at all. And that's what we're trying to do.

AKIKO FUJITA: Yeah. And no question, Robinhood has at least brought in the conversation of trading overall, talking about it on social media now. So Chris, it's good to talk to you today. Christopher Josephs, Iris co-founder joining us today.