By Bye Penny

Yesterday on March 29, 2012, the federal government announced in its budget that it would withdraw the penny from circulation in the fall of 2012. As a Canadian I feel a sense of sadness of course for the loss of the penny, as if some historical icon has been pulled from under me. Through the years I’ve learned to love and hate the penny, but it demise isn’t so bad after all. Pennies aren’t worth much in the current economy, we forever have to carry them in our pockets, and it’s too time consuming to roll them up for the bank. All they are good for is handing to some poor cashier, who has to count them out to make sure they won’t be short-changed on their shift.

The first Canadian cents were struck in 1858 and had a diameter of 25.4 mm (1 inch) with a weight of 4.54 grams. I’m the first to complain about having to put a few pennies in my pocket after buying a coffee at work. Now just imagine putting a few of those 1858 pennies in your pocket. Back then you probably could buy a coffee for a penny. The current penny we know with its iconic Maple Leaf branch was designed back in 1937.

I have fond childhood memories of pennies. As a young kid I remember going to the store to buy candy, only because my friends were doing it. I had no issue dropping 2 pennies for Double Bubblegum, but when it came to the jawbreakers for 5 or 10 cents that was a whole other game. After all, nickels and dimes were shiny silver and worth more! During my lunch break in junior high we used to walk down to the railway tracks and place a few pennies on the rails. We would watch the trains run them over (CP-T) and grin from ear to ear. We even tried taking our new flattened pennies to the store to some buy junk food – but I don’t remember the store owners being too amused. My other memory was dropping a penny into a tub of Coke (KO-N), and coming back in a few hours to find my new shiny penny with little left but a glossy sheen. And that’s about all that pennies were good for even back then.

Thanks to the ravages of inflation and rise in copper prices a penny is even worth less today. Ironically, it costs 1.6x more than a cent to make a cent, so it was no surprise the Canadian penny was doomed. Once a year I roll all my spare changes and take my pennies to the bank.  Shall we say the $5.73 last year in rolled pennies didn’t really contribute much to the overall TFSA or RRSP strategy did it? Bye bye Penny!

Getting Short Changed

However, the penny will retain its value indefinitely and can continue to be used in payment. Cheques, credit and debit cards and electronic transactions will continue to be settled to the cent. Cash transactions will be rounded up or down to the nearest 5 cent denomination, after taxes. According to a recent article in CBC, the 2012 federal budget states: “The government expects that businesses will apply rounding for cash transactions in a fair and transparent manner.”

What consumers expect as fair and transparent, and what business deems as fair and transparent are two separate things aren’t they?  Can you see the potential for raising prices? Two or three cents might seem minimal on the surface, but on a scale of hundreds or thousands, could put much more revenue in business coffers. A bit of creative math, and that $4.77 cent mop attachment at Wal-Mart is now priced at $4.80, a .03 cent or whopping 0.63% increase. That may not seem like much, but on retail volume can add up quickly. Let’s hope the corporate retail sector does indeed play fair in a “transparent manner” in the new penniless marketplace.

RIM In Trouble

While RIM the maker of the iconic BlackBerry is far from being a penny stock, its future is certainly in jeopardy. This week Jim Balistile resigned from the board, leaving the newly appointed CEO Thorsten Heins in an awkward position with plummeting sales ,and  reeling from a less than stellar debut with the playbook. RIM is stuck with declining earnings, wedged between the consumer and business markets, and sitting on the sidelines between the success of Apple and Android. Many are now comparing the RIM situation to PALM. But most Canadians are still rooting for RIM. Is it too little too late for RIM?  Or is RIM a turnaround stock? What little time is left for RIM will certainly tell in the weeks and months to come.

Posts Around the Web…

While you can still get my thoughts for a penny, other bloggers are already charging 5 cents for their thoughts:

• The Passive Income Earner wrote a great post about why he prefers dividends in, Why Dividend Investing?
  
• The Dividend Monk, who always writes stellar in-depth analyses, wrote about 4 Dividend Growers with Almost Zero Credit Risk.
• Over at  Invest It Wisely, Teacher Man (TM) wrote a great post on when is diversification being over-diversified, in The Dangers of Over Diversification. TM writes that all you really need is 4 to 7 ETFs to be fully diversified. Andrew Hallam thinks you only need three!
• Vicky at Vix Money asks what would you do with 20K in savings and 20K in credit card debt? The answer seems obvious, but it may not be as cut and dry as you think, in Pay Down Debt vs. Invest in Savings Account.
• Young and Thrifty had a guest post on 10 Easy Ways to Save Hundreds of Dollars Each Month. An no, you don’t have to re-use your coffee filters! But yes, you will have to give up the Latte’s at $4 per pop!
• Wondering if you should buy your Dad an iPad? Well after watching this video, you might change your mind!

The Ninja was also featured In…

The Dividend Ninja was also featured in the following websites and finance carnivals. Thank you!

• Totally Money Blog Carnival at Motivating Mum 
• Carnival of Financial Planning at Married With Debt
• Carnival of Financial Camaraderie at My University Money
• Carnival of Money Pros at Thousandaire
• Yakezie Carnival at Money Reasons
• Carnival of Retirement at Finance Product Reviews
• Financial Carnival for Young Adults at 20′s Finances

Have a nice weekend everyone!