Trader bets against two UK banks on Brexit fears

Steve Eisman, the Neuberger Berman Group money manager who famously predicted the collapse of subprime mortgages before the 2008 financial crisis, is shorting two UK banks over expectations the country will leave the European Union (EU) without a deal.

The UK is one of the biggest risks Eisman is watching, he said at a conference in Dubai on Sunday, declining to name the banks he’s betting against.

The fund manager expects the UK government to agree its exit from the bloc, but said Parliament is likely to reject the deal after that.

“I’m shorting two stocks in the UK, but I’ve got a screen of about 50, and I might short all 50 if I think Jeremy Corbyn is going to be prime minister,” Eisman said. “Corbyn’s a Trotskyite. Now I know my Trotskyites well and I know you don’t want to be invested in the UK if a Trotskyite is prime minister.”

While Eisman didn’t give any clues as to which lenders he’s targeting, Metro Bank and CYBG are the most shorted financials in the FTSE 350 Index, according to data from Markit. Metro has 7.9% of its outstanding shares shorted, double the ratio at CYBG.

British and European negotiators are locked in talks to break the deadlock over how the UK will exit the EU with just five months left before the deadline.

The uncertainty has prompted more than 70 business leaders, from founder Martha Lane Fox and former J. Sainsbury Plc chief Justin King, to sign a letter arguing that both the government’s current plans, and a no-deal Brexit, would be bad for companies and jobs.

Tesla short

Eisman also said that he’s still shorting Tesla, even though the electric car-maker exceeded expectations in October, reporting its third quarter of positive earnings in its history.

Eisman’s bets against the housing market before the 2008 crisis were chronicled in Michael Lewis’s 2010 book “The Big Short,” which highlighted money managers who foresaw and profited from the market turmoil. A character based on him was played by Steve Carell in the movie of the same name.

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