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These are stories Report on Business followed this week.

Follow Michael Babad and the Globe's top business stories on Twitter.

Separating the weed from the chaff
Voters in Colorado and Washington have set the stage for a new type of small business, something a little different from your traditional corner store.

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There's still the issue of the U.S. government, for whom marijuana remains illegal, but Colorado's Amendment 64 and Washington's Initiative 502 would allow the sale, and recreational use, of small amounts of pot to folks 21 or older.

(Colorado Governor John Hickenlooper warned people not to "break out the Cheetos or Goldfish too quickly" given the federal laws, though he vowed to push ahead after Tuesday's vote.)

These new businesses will be regulated and taxed, the latter of which will no doubt put state accountants in a more mellow mood in these troubled times.

It should be fascinating to watch a new industry sprout, one that includes "cultivation facilities, product manufacturing facilities, testing facilities, and retail stores," as the Colorado government put it. In Washington state, we're talking big bucks.

In Colorado, there will be an excise tax at the wholesale level, with the first $40-million (U.S.) earmarked for a public school capital construction assistance fund.

A fiscal impact statement projects that the new industry would also boost Colorado sales tax revenue by between $3.4-million and $21.3-million a year. There would be local taxes, as well.

"The actual amount of sales tax revenue will depend on the amount and value of marijuana sold through retail establishments," according to the statement prepared in mid-September.

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"According to surveys of current marijuana use by the Substance Abuse and Mental Health Services Administration, an estimated 12.85 to 16.29 per cent of the population over 21 use marijuana regularly or between 486,000 and 616,000 Colorado residents," the document adds.

"Non-residents coming in to the state to purchase marijuana are not included in this estimate. To develop this estimate of sales tax, the current average price of medical marijuana, $239 per ounce, was multiplied by the population percentages and a range of usage amounts from one ounce to five ounces. Total usage amounts range from 0.5 million ounces to over 3 million ounces."

Add to that licensing fees that are projected to bring in $1.3-million in the first year, and some $700,000 in the second.

Of course, the government will have to spend money on a new layer of regulation. And the state Department of Revenue will be tasked with building a schedule of application, licensing and renewal fees, which, at this point, can't top $5,000 (adjusted yearly for inflation, of course).

In Washington, the fiscal impact statement, through to 2017, noted the trouble with calculations given the federal opposition, and gave a nod to the fact that it creates "a closed, highly regulated industry that does not presently exist anywhere."

Still, assuming "a fully functioning marijuana market," along with a number of other assumptions, the state estimates total revenue to its coffers of up to $1.9-billion over five fiscal years. That includes everything from fees for background checks to excise taxes. Then there's a "Dedicated Marijuana Fund" that will pay out funds to various health, social, education and other initiatives, to the tune of up to $1.6-billion over the five-year period. And there are costs.

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Given that it can't be precise on the number of users, it takes into account a national survey and a population forecast to assume 363,000 tokers in 2013 and "a 3-per-cent increase in sales beginning in 2015 to account for population growth and inflation."

(Who could have imagined in those underground days of the Sixties that pot would one day be factored into state fiscal projections.)

Several states have medical marijuana initiatives, but Colorado and Washington are the first for recreational use. Voters in Oregon rejected a similar move, but, hey, it's a short drive to neighbouring Washington.

The idea of "pot tourists" is actually a concern, and it's one that has played out, for example, in the Dutch border town of Maastricht, whose coffee shops do a booming business, drawing thousands from Belgium, Germany and France.

(By the way, the Washington Tourism Alliance website includes a "Plan a Trip" section. Just sayin'.)

As The Globe and Mail's Sunny Dhillon reports, the developments in the U.S. could also eat into British Columbia's multibillion-dollar pot industry.

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"The outcome of these votes in Washington State and Colorado is going to be a significant factor for this industry here in British Columbia," Werner Antweiler, a professor at the University of B.C.'s Sauder School of Business, told Mr. Dhillon.

Facing the fiscal cliff
The new rules in Colorado and Washington, however, won't come into effect fast enough for anxious investors who might need a break from the fear and loathing over the so-called fiscal cliff.

In the end, little changed after the U.S. election, leaving a divided government that will have to come together to solve the issue lest America face another recession.

"With neither party gaining much political capital during the elections, both have little choice but to strive for a compromise that prevents the hikes in taxes and cuts in government spending that are due to start sucking $600-billion, or 4 per cent of GDP, out of the economy early next year," said Paul Ashworth and Paul Dales of Capital Economics.

They were referring to the combination of tax hikes and spending cuts that will automatically take effect at the beginning of the year without an agreement.

The Globe and Mail's Kevin Carmichael doesn't see that happening, believing some solution, even a stop-gap one, will be found.

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If it isn't, the consequences would be dire. The Congressional Budget Office, for example, warned late this week that the automatic tax and spending measures could spark a contraction of 0.5 per cent in the economy next year and drive unemployment above 9 per cent.

"The Republicans' retention of the House, the Democrats the Senate, means Obama will face the same fractured landscape that impeded legislative progress during the last two years of his term. That leaves markets with significant policy uncertainty leading into the fiscal cliff and debt ceiling discussions," said Peter Buchanan and Emanuella Enenajor of CIBC World Markets, referring to the fact that the government is heading toward reaching its $16.4-trillion (U.S.) debt limit by the end of the year.

"Obama, the House and Senate will be under pressure to come to an agreement to avoid a repeat of the mid-2011 brinksmanship game, although any deal involving new cuts to spending would only layer onto existing fiscal austerity," they added.

Bleak outlook for Europe
Europe's outlook may be growing bleaker, but the European Central Bank isn't ready to act again. Yet.

A day after the European Commission released new economic projections, chief Mario Draghi's European Central Bank held its benchmark lending rate steady at 0.75 per cent and gave no hints as to its future course.

"There will be a slight feeling of disappointment for those expecting Mr. Draghi to signal a December rate cut today," senior economist Michael Gregory of BMO Nesbitt Burns said Thursday, after the central bank chief painted a glum picture.

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"In fact, at the Q&A, there was not much clue as to whether rate cuts were discussed at all. For now, the ECB remains in a wait-and-see mood: A further sharp deterioration in the macro landscape could trigger a further dovish adjustment next month, but as it stands, it would appear that rates will stay on hold. This is in line with our view that at 0.75 per cent, monetary conditions are highly accommodative and that the answer to the current euro zone economic predicament has little to do with cutting interest rates."

On Wednesday, the EC projected ongoing high levels of unemployment and broad economic weakness in some of the weaker nations of the euro zone, the 17-country monetary union.

"Unemployment in the EU is expected to remain very high," it said in its autumn forecast. "The large internal and external imbalances that built up in the pre-crisis years are being reduced, but this process continues to weigh on domestic demand in some countries, and economic activity diverges significantly across member states."

The EC now projects economic growth of just 0.5 per cent next year for European Union, and no growth for the smaller euro zone. Both are forecast to register growth of 1.5 per cent in 2014.

"The weak short-term growth outlook raises concerns for the labour markets, where a further rise in the already high unemployment rate next year appears likely," said Maro Buti, the group's driector general of economic and financial affairs. "Bold reforms are needed to prevent a prolonged period of high unemployment, which would bring social hardship and a destruction of human capital detrimental to longer-term growth."

The Greek economy is expected to contract by 6 per cent this year and 4.2 per cent next, with growth not resuming until 2014, and even then at just 0.6 per cent. Greece's jobless rate is projected at 24 per cent next year, easing only slightly a year later. Spain's jobless rate next year is forecast to be 26.6 per cent. Over all in the euro zone, unemployment is projected to reach 11.8 per cent next year.

Uncertainty takes its toll
The troubled recovery and market uncertainty are soiling the balance sheets of corporations, and in areas where you might not expect.

As Marina Strauss reports, McDonald's Corp. this week marked its first monthly decline in same-store sales in nine years, as this key measure in the retail industry showed a drop of 1.8 per cent in October. At the same time, Tim Hortons Inc. reported that growth in same-store sales slowed sharply in the third quarter.

That marks a shift because fast-food shops can traditionally hold up in a slump

"When people stop buying cheap burgers, you know something isn't quite right," chief economist David Rosenberg of Gluskin Sheff + Associates said Friday. "And the high-end crowd seems to be on a diet too based on the forecast downgrade by Whole Foods yesterday."

On the financial services side, Tara Perkins and Jacqueline Nelson write, Canada's Manulife Financial Corp. was forced to delay the profit targets it set a couple of years ago, a sign of the troubled times in the wake of the financial crisis. Not only is it pushing back its goal of a $4-billion annual profit by a year, to 2016, it's also changing the measure so that the target excludes the impact of accounting fluctuations or one-time items.

In the oil patch, Penn West Petroleum Ltd. unveiled a corporate shakeup, amid efforts to sell $1.3-billion in assets, Carrie Tait reports. There was also a change at the top of Rona Inc. after a sharp drop in quarterly profit.

And then there's Groupon Inc., whose shares have crumpled since its IPO a year ago. Like many other companies, it blamed Europe's troubles as it missed estimates for its third-quarter results.

Jet giant Bombardier Inc. also announced a setback this week, though for other reasons. The Montreal-based company disclosed a six-month delay for the first flight of its C Series jet, to June 2013 rather than this December. That relates to some suppliers being unable to deliver components on time, Bertrand Marotte and Greg Keenan report.

And yet, amid all of this, the skies appear friendlier, at least for Canada's major airlines.

As Guy Dixon writes, Air Canada rebounded to a third-quarter profit of $429-million, or $1.54 a share, while WestJet Airlines Ltd.'s quarterly profit surged 80 per cent to $70.6-million or 52 cents a share.

12 things
1. Dennis Gartman warned the investing public on the morning of the U.S. election that the international media would wrongly have the masses believe President Barack Obama would win hands down. But, the publisher of The Gartman Letter advised, these clearly uninformed, fawning news organizations weren't taking into account the difference between the president's "sparse and quiet" rallies compared to Mitt Romney's "huge, loud and energetic" rallies. Oh, yes, and that "the polls, we suspect, have missed the groundswell of support that Gov. Romney will see today by the heretofore forgotten 'Evangelicals,' the Catholics and white men." Ah, if only the evangelicals, Catholics and white guys had been able to get their white guy over the top.

That was election day. Mr. Gartman followed this up on Wednesday saying he was wrong, though noting that a "bear majority" (I'm not sure whether that was a typo or exceptional wit for a market guy) had spoken according to the constitution, and that the president shouldn't take it as a mandate to "push forward with his far-left-of-centre philosophies."

So how did Mr. Gartman, and the Republican Party, get it so wrong? According to him, on Thursday, they missed the "massive shifting nature of the demographics." Like the fact that there are now more unmarried women than married, often the "breadwinner" and too frequently the only one, who need to be able to embrace Republicanism. And like the fact that there are more non-white kids being born than white kids. Oh, and by the way, America needs to embrace immigrants who are "risking their lives" to get to its shores, supporting families in places like Mexico, Honduras and Egypt, and who are doing work Americans won't. Take note, "there is wisdom in the statement that rarely in history has anyone risked their life to get to Russia, or China or even perhaps Europe."

(Or, maybe in time, Canada? He didn't say that, but he did say that "in light of the decision made by the Canadian Minister of Resources last weekend to end Petronas' bid for Progress Energy, we had no choice but to exit our long position in the [Canadian dollar] and to swap them for Aussie dollars instead, doing so Monday, Oct. 22, leaving us long of five units of the Aussie dollar/short of five units of the yen and reasonably comfortable with that position." Now there's a recommendation for you if you think the evangelicals, Catholics and white men failed Mitt Romney.)

2. Headline of the week, from Reuters: "Hudson's Bay IPO: more attractive in 1670 than now"

3. Nothing says Canada like beer and hockey. Except there's no hockey. And beer sales are feeling it. So Molson Coors Brewing Co., a National Hockey League sponsor, plans to go after the NHL for compensation when the lockout ends. ""Whether it's people not actually physically going to the venues and consuming there, consuming in venues around the outlet before that, or indeed having NHL sort of parties at home, all of those occasions have disappeared off the map and you just can't replicate them," chief executive officer Peter Swinburn told The Canadian Press.

4. Britain's Conservative Party has suspended MP Nadine Dorries because she opted to appear on a reality TV show - I'm a Celebrity ... Get Me Out of Here - that would take her to Australia for a month or so, meaning she couldn't do her parliamentary and other chores. Reality TV? Question Period comes to mind.

5. Tweet of the week, from @jennakimjones: "Was going to take a pic of me wearing my I Voted sticker but I'm not wearing makeup. Not only am I free to vote but I'm free to vote ugly!"

6. When this Bud's not for you: Anheuser-Busch is asking Paramount Pictures to get rid of the Budweiser logo shown as Denzel Washington's character in the new movie Flight is behind the wheel, The Associated Press reports. A Bud executive told the news agency: "We would never condone the misuse of our products, and have a long history of promoting responsible drinking and preventing drunk driving."

7. New York Attorney General Eric Schneiderman has launched a probe into allegations of price-gouging in the wake of Hurricane Sandy, saying his office received hundreds of complaints: "While the largest number of complaints related to increased gasoline prices, consumers contacted the Attorney General to report possible gouging for emergency supplies like generators, hotels raising rates due to 'high demand,' as well as increased prices for food and water." Bloomberg News reported that the AG's office was trying to determine whether the sale of gas via Craigslist at up to $8 (U.S.) a gallon was legal.

8. A municipal court judge in Cleveland has ordered a 32-year-old woman to stand at a street corner for two days wearing a sign reading "Only an idiot drives on the sidewalk to avoid a school bus." According to The Associated Press, she was seen on camera driving so she could get around said bus.

9. Colour commentary of the week, on U.S. election day, from Kit Juckes, the chief of foreign exchange at Société Générale: "Vote early, often and well. That's about all we can ask of Americans. I cannot see an outcome that would make me optimistic about growth in Europe, or keen to own the euro. The best the U.S. can do for the rest of us is to turn the fiscal cliff into something more like a fiscal pimple, and re-become a driver of global growth, 'cos we ain't doing nothing this side of the Atlantic to help ourselves."

10. In the life-isn't-fair-when-you-look-your-age-and-you're-sick category, a Danish study of 11,000 subjects suggests people who look older (not gray hair, but no hair, and wrinkles near your ears) have a greater chance of a heart attack or arteries clogged with nasty stuff than people who may be the same age but appear younger, The Associated Press reports.

11. Runner-up tweet of the week, from @perlapell: "I want an app on my iPhone that stretches my jeans for me after I get them out of the dryer."

12. A pregnant Galicia Malone stopped on the way to give birth at a Chicago area hospital Tuesday morning ... to vote, NBC reports. The 21-year-old's contractions were still five minutes apart, so why not?

Required reading this week
A Canada-Europe free trade deal, now entering a final push of tense negotiations, is uncharted and potentially dangerous terrain for Canada, Barrie McKenna writes.

Companies across Calgary are experimenting with a raft of new employee perks and benefits as the oil patch battles a skilled-worker crunch that is beginning to inject a Silicon Valley flourish into its office amenities, Nathan VanderKlippe reports.

A major shuffle at the top of investment management firm Jarislowsky Fraser Ltd. resulted from a decision by two of its top executives to start an investment counselling firm of their own. Sean Silcoff and Jacqueline Nelson report.

Canada's oil sands risks being left behind by the global energy industry if the pipelines needed to carry bitumen to the west coast do not soon materialize, according to a Chinese oil industry academic, Carolynne Wheeler writes from Beijing.

Canadian politics almost pulled Frank Stronach away from Magna International Inc. in 1988, Greg Keenan notes. Austrian politics has lured him away in 2012, probably permanently.

What to watch for next week
All eyes will be on the wounded euro zone as, first, finance ministers meet in Brussels at the beginning of the week as questions continue to swirl around Greece. Then, on Thursday, the Eurostat statistics agency is expected to report a weak economic reading for the third quarter.

"We expect the flash estimate for euro zone GDP in Q3 to show a contraction of 0.1 per cent quarter-over quarter, after -0.2 per cent quarter-over-quarter in Q2," said chief economist David Watt of HSBC Bank Canada.

"The current divergence between the performance of core euro zone countries and the periphery is expected to continue with Italy and Spain expected to have contracted while Germany is likely to have grown by 0.3 per cent quarter-over-quarter in Q3," he added. "Based on the available data for September and October, Q4 is shaping up to be much worse."

In the United States, Hurricane Sandy is expected to have had an impact when the U.S. government reports Wednesday on how retail sales fared in October. They are believed to have dipped by about 0.2 per cent or more.

"The recent resurgence in U.S. consumer spending may have been stopped in its tracks by superstorm Sandy," said Andrew Grantham of CIBC World Markets.

"While spending on food and other household essentials may have received a lift as Sandy approached the Eastern seaboard, it will likely have been offset by the loss of several days' activity in such a vast area of the U.S. economy. Unit auto sales have already showed disruption from the storm, easing almost 5 per cent from the prior month."

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