The Weekly Lineup: A Penny for Your Thoughts Edition

By Bye Penny

2010-Canadian-PennyYesterday 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:

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Have a nice weekend everyone! 🙂

10 Responses to “The Weekly Lineup: A Penny for Your Thoughts Edition”

  1. youngandthrifty

    Mar 30. 2012

    Thanks for the mention and great history lesson! I never tried putting a penny in my coke or tried putting a penny on a rail road track.

    What a rebel you are!

    I’m sad to see the penny go too- it does make sense to eliminate it since it costs more to make it than its worth.

  2. My University Money

    Mar 31. 2012

    Thanks for the mention DN (as if you hadn’t given me enough exposure already!) and Mr. Hallam is probably right to a large extent. I figure there that there is absolutely no arguing you need more than 7!

  3. adam

    Mar 31. 2012

    Interestingly enough the last time pennies had a significant amount of copper in them was 1996. Since then they have only been copper plated.

  4. Vicky

    Mar 31. 2012

    I am a bit sad that the penny is disappearing as it is a game with my sister to see who picks up the penny. She thinks heads up is lucky while I believe tails up is lucky. 🙂 It will be interesting to see how stores handle the change.

    Thanks for the mention!

  5. Dave

    Apr 01. 2012

    I also feel that RIM is in a lot of problems too. From $60 to the current $14 dollars is really an indicator of big problem. Will see..

    • The Dividend Ninja

      Apr 01. 2012

      Hi Dave, the next few months will be critical for RIM! 😉 It’s either a great value play or a goner, there is no middle ground left at this point. Another Nokia or Palm?

      Don’t forget even AAPL was a complete mess before Steve Jobs came back,and turned it around with the innovations of the iPod, iPhone etc. And then there was Cisco Systems throughout 2010 and 2011 which looked like it was going to go down. Significant restructuring and focus on the core business turned it around.

      One never knows 😉 Would I buy RIM at this point (even though I have a BlackBerry and like it)? Probably not.


  6. Invest It Wisely

    Apr 01. 2012

    Thanks for the inclusion! From what I’ve read the rounding should be done on the final price and not the price before tax, so it would be something like this: $4.77 + 15% = $5.485 ==> $5.50.

    Businesses can always raise prices, but it doesn’t mean much unless they can earn more revenue at the higher price. Otherwise, they would have already done it. It’s more likely prices go up due to inflation.

    • The Dividend Ninja

      Apr 01. 2012

      Invest It Wisely, UR welcome for the mention! 🙂 TM writes great articles.

      Yes I understand the rounding-up/down is based on the taxable amount. But its simple math to adjust a price to make it round-up instead of staying the same or rounding-down. Two or three cents for a large scale retailer is indeed more revenue. 😉

  7. Interesting news on the Canadian penny. Similar discussions are happening here in the US as well, so we will see what happens.