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Thoughts for your penny: What are you doing with yours?

These are stories Report on Business is following Monday, Feb. 4, 2013.

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A nickel for your thoughts?
I'm curious to know what Canadians are doing with their pennies, which officially die today.

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You can actually still use them, the federal government says, but only at shops that still want to take them. You can take them to the bank, which no doubt will want them rolled, or a charity, which also might want them rolled.

"The standard practice is that pennies, like other coins such as dimes or nickels, are rolled or wrapped for deposit," the government says. "Financial institutions and charities have the discretion to decide whether pennies must be rolled or not."

Or, you can leave them gathering dust because it's too much of a hassle to do anything else with them.

(See what Globe readers are doing.)

Today, Canada stops giving out pennies to the banks. People are supposed to take their pennies to the bank, and eventually they'll be melted and made into other stuff.

The cent still exists as a concept where credit and debit are concerned. It's only in cash deals where amounts are now to be rounded up or down. And, of course, it  still exists where the government's concerned because the GST and HST will be calculated to the penny and added to the price. So only the overall total is rounded. Finance Minister Jim Flaherty may have killed off the penny in his last budget, but he still wants every cent due him.

All is supposed to go swimmingly today, though, The Globe and Mail's Marina Strauss reports, many smaller businesses aren't ready.

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"In eliminating the coin with the lowest face value, Canada is following the example of many other countries that have done so successfully, e.g. Australia, Norway, Switzerland and New Zealand," the Desjardins economists said.

"The operation went smoothly in these countries and eliminating the one-cent coin, or the smallest coin, had no impact on the inflation rate, as prices were rounded symmetrically. In some cases, countries even saw certain retail prices drop slightly in the short term due to marketing operations. In fact, retailers preferred rounding final prices in the client's favour to give them an edge over their competitors."

But for the fact that my corner store has no competitors nearby. Same for the McDonald's. There are four manicure-pedicure places, and I guess I should check them out to see.

More importantly, now that we're done with the penny, I'd suggest we look next at the nickel, which some think is equally useless, and which drives me crazy, particularly when the snack machine in my office gives me all my change in 5-cent pieces.

The Royal Canadian Mint describes the 5-cent coin as "industrious, enduring" on its website, and talks about the equally enduring nature of the beaver, which first graced the coin in 1937 with a design by artist G.E. Kruger Gray. The beaver has been honoured on everything from stamps to emblems.

Okay, I get it. But all I'm reminded of is how the vending machine gave me change in nickels for $1.50 worth of peanuts last week. And those 10 nickels now sit with all the pennies gathering dust on my dresser.

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Of course, the nickel is going to be in greater demand now because, on the penny's death, cash transactions will be rounded up or down to the nearest 5 cents. And, I'm betting, no one really wants to get rid of the beaver, although, hey, the penny boasted the maple leaf.

And I'm not the only one thinking about the fate of the 5-cent coin, which is, of course, bigger than a dime and weighs more in your pocket.

"With the penny set to be eliminated, the time has probably come to assess the pertinence of eliminating the nickel in the next few years now that it is also becoming increasingly obsolete," said Desjardins economists François Dupuis and Hendrix Vachon.

"Doing so would, this time, mean having to round prices up or down to the nearest dime!"

The dumb things aren't even nickel. They used to be 99 per cent nickel from 1922 to 1942, and then 99.9 per cent, from 1946 to 1951, and again from 1955 to 1981. But now they're 94.5 per cent steel, 3.5 per cent copper and 2 per cent nickel plating.

They're heavier than pennies and dimes – the latest versions are 3.95 grams compared to 2.35 and 1.75, respectively, while most of the older versions are 4.54 or 4.6 grams.

They're thicker than dimes, too, at 1.76 millimeters to the dime's 1.22. For that matter, they're thicker than quarters, which are 1.58.

The little buggers multiply like rabbits, too: 5,543,005,243 between 1908 and 2011.

In days of yore, the nickel was actually worth something. Indeed, there was a page in the 1917-1918 fall-winter catalogue of the old Eaton's department store chain that screamed "Great 5¢ Value." A nickel in those days could get you a tea bell, a nutcracker, a scrub brush, a medicine dropper, and even "babies' feeder teats," war tax included.

Even when I was a kid, it got you a bag of chips.

But now, it buys you all of one minute in a Toronto parking meter.

But, sigh, as The Globe and Mail's Tavia Grant reports, the Mint doesn't appear to be ready to take my advice. While a penny costs 1.6¢ to make - I wonder who came up with that one? - the other coins cost less than their face value.

Late-breaking news

Whither the markets
Global markets pulled back today after their recent rally, but the general sense of optimism remains.

With the Dow Jones industrial average still within spitting distance of a record high, how do things look? Not as good as you might think, according to Bank of Nova Scotia analysts today, as some miss the bigger point.

"U.S. equities have been a poor investment for a long period of time," said Scotiabank economists Derek Holt and Dov Zigler, in comments that came as the Dow was some 200 points shy of its record, expressed as not adjusted for inflation.

"The average investor only made money on them if they were better than most at timing the market's lows and getting out at the highs and doing this repeatedly," the Scotiabank economists said.

"Professional investors would have made money only if they consistently timed the lows and highs over time and not just one of the big calls," they said in a research note.

"The long-term patient retail buy-and-hold investor would not have fared as well. Against the popular view in equity-land that it's only the bottom-up that matters, it has been timing the macro developments that have been the bread winner for any cycle timer. This observation is true without adjusting for inflation, but it's truer yet after taking account of inflation. Indeed, the S&P 500 is still almost 25 per cent lower than its peak in early 2000 after taking account of inflation, and it has been volatile but with downward drift since, so be careful with the record-high optimism."

Their research shows that U.S. stocks surged in the 1990s, in both inflation and adjusted measures, but since then have been "drifting within a wide, volatile and generally sideways (nominal) to down (inflation-adjusted) range."

David Rosenberg, the chief economist at Gluskin Sheff + Associates, also noted the "sideways" trend today, while citing the fact that the S&P 500 hasn't touched a fresh record since its March, 2009, trough.

"At this same juncture coming off the 1982 lows, the market reached a record high no fewer than 152 times," Mr. Rosenberg said in his report.

"Through all the wild ups and downs, the S&P 500 is still 2 per cent lower than it was exactly 13 years ago – the hallmark of this secular sideways phase."

Markets have generally been buoyed of late by economic readings, corporate earnings reports and more stability in the euro zone. European markets, at least, were troubled  today by Britain's warning today that it could break up wayward banks, and by political issues that have brought Europe's debt crisis to the fore again.

"Last night's power failure at the U.S. Super Bowl appears to have manifested itself into European equity markets today as the sentiment that had fed the strong rally of recent weeks appears to have come to a shuddering halt," said senior analyst Michael Hewson of CMC Markets in London.

"Investors are once again being spooked by political uncertainty from both Spain and Italy as both countries deal with local political difficulties that could derail ongoing and future reform programs," Mr. Hewson said in a research note.

Where Britain's banks are concerned, comments from the Chancellor of the Exchequer also weighed on the markets.

"The City has spent the day digesting comments made by U.K. chancellor George Osborne over his handling of bank segregation," said market analyst Alastair McCaig of IG in London.

"Many will be worried that the strict guidelines being set out will prevent the investment arms from turning around the fortunes of these banks. With U.K. household debt around the £1.4-trillion mark, the retail departments of these banks are far from risk-free, as it is the U.K. banks that hold most of this debt."

Britain gives Carney 'super cop' powers
Britain's finance minister today outlined an overhaul of the banking system, including giving the Bank of England the designation of "super cop" as Mark Carney takes the helm.

George Osborne, the Chancellor of the Exchequer, said in a speech that regulators will be given the power to break up banks as the financial system changes.

"My message to the banks is clear: If a bank flouts the rules, the regulator and the Treasury will have the power to break it up altogether - full separation, not just a ring fence," Mr. Osborne said.

In April, the Bank of England gets sweeping new powers. As Mr. Osborne put it today, it will be a "powerful new watchdog with real teeth," and the "super cop of our financial system."

Mr. Osborne's warnings sent a shiver through British banks as Mr. Carney, the Bank of Canada governor, prepares to jump to the Bank of England in the summer.

"In London the banking sector is weighing on investor sentiment, as traders are afraid Chancellor George Osborne will break up the banks," said market analyst David Madden of IG in London.

"In recent years the banks haven't done much to win the affection of the great British public," Mr. Madden said in a research note.

"First there were reckless lending policies that fuelled the property bubble, and once this burst the country was dragged into what could be a triple-dip recession. Then we had the mis-selling of payment protection insurance to the unsuspecting public; lastly there was the LIBOR-rigging scandal. All of this has infuriated people across the UK, and now the chancellor must be seen to be doing something about it."

Scandals bite euro zone
Political scandals in Spain and Italy are shaking the confidence of voters in their governments just as those governments try to implement deep austerity measures designed to put their economies on sustainable financial footings, our European correspondent Eric Reguly writes today.

The scandals have translated into suddenly higher bond yields in Spain and Italy, reversing a downward trend that began last August, when the European Central Bank agreed to backstop any euro zone country that is in danger of getting shut out of the sovereign debt markets.

CP grabs executive from rival
The new chief at Canadian Pacific Railway Ltd. has snatched a key senior executive from his rival railway, and promised not to raid its competitor again for several years, at least.

Hunter Harrison announced the appointment of Keith Creel as president and chief operating officer today, The Globe and Mail's Bertrand Marotte reports.

Mr. Creel had been chief operating officer at rival Canadian National Railway.

Mr. Harrison, the former chief at CN, came out of retirement to be CPR's chief executive officer amid a shakeup prompted by Bill Ackman's Pershing Square Capital Management.

And in an interesting twist, CN announced that, with Mr. Creel's departure, it has now settled its "differences" with both CP and Mr. Harrison.

"The settlement ends the outstanding litigation between CN and CP before the Federal Court in Chicago, Illinois," CN said.

"As part of the settlement, CP has undertaken not to hire certain CN employees until December 31, 2016. Other terms of the settlement remain confidential."

How we're saving
Canadians who plan to save this year are aiming to sock away an average of $9,859, but 66 per cent say the money is intended for vacations, luxury items, entertainment and hobbies, The Globe and Mail's Bertrand Marotte reports.

The fact that the Canadians surveyed in the BMO Household Savings Report say they intend to save about $600 more this year than last is encouraging, but they must also act responsibly, says Ernie Johannson, senior vice-president of personal banking at Bank of Montreal

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