If your local bank called you and said, “We hear that you might be getting a little shaky in your financial doings. We’d feel better if you paid us a bit more on your car loan, home equity loan or even your mortgages.”

Could you just start writing big checks on the spot with little or no notice? How about if the local grocer and dry cleaner where you have house accounts got word about a run on your checking account and told you, “Pay me or no more business.”

Much is being written and said about the credit crunch enveloping the markets in the past several days, especially today. Companies are getting whacked by their banks and other creditors demanding cash--lots of it--on the spot. And when they can’t get it, trouble ensues. Big time.

And as the financial media gets a whiff of the trouble, it’s off to the races to Chapter 11 as investors dump the stock and/or short it, sending otherwise operating companies into near or real receivership.

What it comes down to is this: Are companies--mortgage lenders, banks and other financials--finished? Or is it just the perception and the knee-jerk response to that perception that cause them to be finished?

We’ve seen that too many banks and financials weren’t necessarily looking at the risks in getting paid by some of their lending and investment deals. We’ve seen the mess already in the subprime segment of the mortgage market, where low-credit folks entered into mortgages that were far from suitable for their situations and now are being unwound with dire consequences for all involved.

This was a very small part of the mortgage market. But now, after those handful of financials have gone through a real reckoning, more and more investors are taking aim at banks and financials that have nothing to do with subprime lending. If anything, they have top-tier borrowers far from being delinquent and even further away from defaulting.

But when you see a vast chunk of capital pulled from any market--in any condensed bit of time--a crunch is what you’re going to get.

And for the mega-banks and insurance companies that back them up to the mid-size and smaller firms, the market has its guns out and is loaded for bear.

But it isn’t stopping at mortgage firms. It’s now extending to any company in nearly any industry that relies on corporate credit. There’s not a company out there that has no debt. And the market has plenty of folks ready to sell or short seemingly any stock of any company that can be said to have debt or rely on bank lending.

It doesn’t matter whether the companies are in mundane, boring, cash-rich businesses or higher-risk enterprises. All it takes for folks to get wound up in panic is to simply hear or read about how somebody is critical of a company that has leverage or debt of any sort and it’s time to sell.

We’ve seen plenty of our favorite Personal Finance portfolio companies--from mega global utilities and infrastructure companies to smaller phone companies and pretty much any stock that pays a decent dividend--get whacked.

And even as the bond market has once again become a market refuge, bond funds are being dumped, though their bonds are either steady and/or climbing in value. That’s sent their shares into big discounts to net asset values.

Should we just write “don’t worry, all will be well, just be patient”?

That never cuts it; not before, not now.

We know this fear of cash-generating companies and the like isn’t finished. And it’s likely that today’s action in the market isn’t going to be the end of the near-term pain.

But what we do know is that our companies weren’t flighty before today’s mess, and they won’t be after reality begins to creep back into the market.

Should we just dump and sit on a pile of cash?

Can’t make much with your cash in a mattress.

We’re watching each of our companies and funds, keeping an eye on their operations, studying each for how and when their bonds and other financing arrangements are due, and how they’re faring with their banks and other creditors.

In the meantime, note that each of our holdings inside PF are running their businesses--just like they did yesterday, the week before that and the years before that.

Just like you, they’re going about their business. They’re not glued to the financial media, thinking they could go bust any second.

This is how we need to be. It’s not pleasant to see good companies paying us good dividends with stocks that keep drifting lower day after day.

But we’ve been here before. Any of us who have invested in any of our cash cow companies remembers that now and again our stocks get whacked, not on real news but on perception and conjecture, only to have reality bring back buyers.

And all along the way, the dividends keep coming.

This is what we’re doing. We’re watching each of our holdings, making sure we understand as much as we can and know if reality means “trouble” rather than better stock and bond prices.

Come and Chat

If you’d like to hear firsthand about some of our investments, particularly those in some of the more-interesting markets beyond the usual Wall Street fluff, join me on one or more of my upcoming conferences or travel opportunities--see below for the various opportunities available.

Head out to the East Coast, and join me and PF Associate Editors Roger Conrad and Elliott Gue at the Washington, DC, Money Show, September 6-8, 2007. The conference will take place at the Wardman Park Marriott, located in downtown Washington DC. Click here to register for free. Be sure to tell them I sent you.

Noble palaces, historic villages, stunning natural vistas and indispensable, one-on-one conversation: I’ll be cruising down the blue Danube Sept. 8-16, 2007, along with PF Associate Editors Roger Conrad and Elliott Gue. You’ll have unfettered access to talk about your portfolio or any other topic that comes up as you take in Central Europe’s rich culture and historic beauty aboard the River Cloud, a “five-star floating hotel.” Interested in exploring Europe and your portfolio? Contact Joseph H. Conlin Travel Management toll free at 877-814-6502 or via e-mail at nycimpresario@mac.com to finalize your plans.

Farewell

Finally, a man who knew how to turn a perceived loss into victory died at 75 years.

Bill Walsh was the coach of the San Francisco 49ers and knew what it meant to keep his team together and focused on the job at hand. And by knowing when to step up and throw it and when to run, Bill paved the way to a few championships. His approach is one that would serve us well in the markets.

If you’re interested in having me or one of my cohorts address any investment or professional groups, please e-mail me at bygeorge@kci-com.com with ideas or suggestions.

Neil J. George, Jr.

Errors/Omissions: I always welcome being called on facts, figures and commentary from readers and look forward to your feedback. I can be reached by e-mail at bygeorge@kci-com.com.