"The Big Short's" Steve Eisman Is Shorting UK Banks, Expecting A Hard Brexit

Amid fresh reports that Theresa May may have a "secret" Brexit deal up her sleeve, one that would finally allow her to secure a deal that could win parliamentary approval thanks to a major concession from the European Union, one famous trader isn't buying it.

Speaking at a conference in Dubai on Sunday, "The Big Short's" Steve Eisman said that he is shorting two U.K. banks on expectations of a hard Brexit. Eisman said that the U.K. is one of the biggest risks Eisman is watching, and while he declined to name the two banks he is shorting, he said that he expects the U.K. government to agree its exit from the bloc, but that Parliament is likely to reject the deal after that, Bloomberg reported.

"I’m shorting two stocks in the U.K., 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 U.K. if a Trotskyite is prime minister."

While Eisman didn’t hint which banks he’s targeting, Bloomberg notes citing Markit data that Metro Bank and CYBG are the most shorted financials in the FTSE 350 Index. Metro has 7.9% of its outstanding shares shorted, double the ratio at CYBG. Eisman also said that he’s still shorting Tesla, despite the carmaker's impressive surge since reporting strong results.

British and European negotiators remain 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 prompted more than 70 business leaders, from lastminute.com 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.

It is possible that Eishman may get burned on his short: over the weekend, the Sunday Times report that Theresa May has achieved concessions from the EU to keep the UK in a customs union and assembled a detailed "secret" Brexit plan that, among other details, would kill off the controversial Northern Ireland "backstop" that had become the main obstacle to further negotiations.

Working in secret, May has reportedly developed a detailed, 50-page plan for a Brexit treaty that will allow the entire UK to remain within the EU customs union - that is, until a final deal can be hammered out during the transitionary period, which Brexiteers fear could mean "forever."

As part of the new "secret" deal, May has effectively scrapped most of her controversial four-page "Chequers plan", and replaced most provisions governing the single market and customs union with an agreement to hash out a "Future Economic Partnership" - essentially an open-ended agreement to continue negotiations that leaves open the possibility of reaching a free trade deal like the one enjoyed by Canada, a provision that is bound to appease at least some of the Brexiteers. The word on the street in Westminster is that part of the plan "could have been written by Jacob Rees-Mogg," the leader of the hardline Eurosceptics, which, if true, would signify a major victory for May.

In response to the Sunday Times article, which has been known to report false optimistic news on prior occasions, May's spokesman said the report was "speculation."