Hartnett: Subprime Consumer Credit Cracked

We have been pounding the table in recent weeks that a major subprime crisis (one for now focusing primarily on low income Americans, is brewing below the surface of the otherwise stable economy and euphoric markets (see "Subprime Crisis 2.0? Red Flags Fly As Alleged Fraud Triggers Billion-Dollar Auto-Lender Bankruptcy" and "Worst Thing I've Ever Seen"; Trickle-Down Terror Of Tricolor Trouble Hits Alts). And in his latest Flow Show note (available to pro subs), BofA's Michael Hartnett picks up where we left off, and writes in the Zeitgeist section that "these credit cracks are a big deal, but not big enough to put top in right now."

But before we dig into Hartnett's concerns on what he calls "Krunchy Kredit", let's take a look at his bigger picture observations starting with the fact that each of past 5 months monthly low for S&P 500 printed on 1st trading day of month…first time this has happened since 1928 (we don't have to remind you what happened in 1929).