After the financial crisis, Americans have no where else to invest their money

To a lot of Americans, since the financial crisis, where to place the spare cash is a headache problem.

It goes without saying about the risks of investing in the stock market. Since the beginning of the year, the 3 indexes on the New York stock market have plummeted up to 40% with no high hope for a possible Christmas rally. Investment guru Warren Buffett at about a month ago suggested Americans to invest in the US stock market but under the crisis not met before in a hundred years, the Buffett effect seems not effective. About a month ago, Buffett announced to pay 115 USD per share to buy Goldman Sachs shares. Now the price for Goldman Sachs share has dropped by more than half. The money loosing effect has made many investors staying out of the stock market. Not seeing any end to the bear market, investors would rather hold cash then loose money.

It is known that most Americans do not put their money in the bank. Fund investment is how Americans manage their money. In US close to half of the families have fund investments. Because of the lack of time and energy to manage their money, Americans placed trust in the fund manager's ability to manage their money. But with the recent overall bad performance of the market, the fund managers are unable to demonstrate their money management capability. Since this year, stock market, bond market and the commodities market all faced downturn. Except for some funds that does shorting, most US funds average returns are no better then S&P index performance. The sales pitch for fund managers are now something like the fund industry lost 40% but we only loose 30%. Out of dismay for the funds performance, investors simply withdrew their investments.

Out of concern for the safety of their money, some Americans considered putting the money in banks. But putting money in the bank may not be safe after all, something quite unexpected by the American people. In this year, there are 20 US banks that went bankrupt. Although depositors have 250,000 USD in deposit insurance, but to think of the troubles after the bank went bankrupt, depositors are now fearing the smaller banks.

Small banks can go bankrupt easily, but the big banks are no where better. Because of shortage of liquidity, some big US commercial banks came out with the idea of paying high interest rate for deposits. 2 weeks before going bankrupt, Washington Mutual once announced a 4.5% yearly interest rate savings deposit advertisement to attract clients. Not long after the ad was placed, the bank went bankrupt. Citi in November also announced a 4% yearly interest rate plan for 6 months deposit. But 1 week after the plan was launched, there are news that Citi encountered problems. People slowly began to realize that big banks coming out with savings plans paying high interest rates are not to attract clients from the smaller banks, but they are signs that the banks are facing shortage of liquidity.

To the normal investors, to invest in farming products, crude oil and other commonalities futures trading, the difficulties are quite high. Gold's ability to preserve value is weakening gradually. Other then putting the money in the backyard or under the pillow, there does not seem to have any other better ways of investing the money.