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Grading Service BS


jlueke
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I was visiting a friend who still deals in US coins a bit. Last month he showed me three Indian head cents he was going to send to PCGS. They came cracked out of PCGS, ICG, and ANACS holders. He got them back and they all came back questionable color. Wow, I guess they want you to keep submitting until it gets in their magic case.

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IMHO, this is the issue with the "market acceptable" concept whether it's applied to grading, toning or repair (and most recently even history). What is market acceptable today is not necessarily acceptable tomorrow.

 

As long as the majority of the collecting public continues to accept and support this coin marketing approach the issues will continue. The only way to "protect" yourself is to decide for yourself if the coin meets the price irregardless of the plastic. Think of the plastic as little more than the full page color ad for cars in your Sunday paper. This is about enticing you to spend your money not about ensuring the quality. Adds a new perspective, eh?

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This makes me glad I like ancients. This whole obsession with grades and plastic has gone far overboard in the past twenty-five years. I agree that you should buy the coin, the problem is if you happen to like mint state coins you might never be able to sell them at a market price since the plastic would get in the way.

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This whole obsession with grades and plastic has gone far overboard in the past twenty-five years. I agree that you should buy the coin, the problem is if you happen to like mint state coins you might never be able to sell them at a market price since the plastic would get in the way.

 

Taking your second point first, you will always be able to sell a Mint State coin (or AU or XF or whatever) at the whatever the market price for that piece currently is - market price being what a knowledgable person might pay. What you will not necessarily be able to do is sell at the grade (read implied RETAIL price) on the plastic or what you paid for it. You need to realize that these are three separate things. One is the real price/value, the other is the advertisement or marketing price, and the last is what you forked over in your desire to own. Only the first has any connection to reality.

 

Additionally, while the marketers (graders) might have felt at the time of placing their advertisement (grade) that the toning was acceptable or minor repair/retooling or other defects were acceptable for their advertised price (grade), there is no guarantee that prospective purchasers will feel the same in the future. In sum, if you cannot reasonably appraise the piece for yourself then you should not purchase the coin.

 

As to your first point, it was bound to go overboard. Think about it. Once you convince customers of the need for a professional appraisal for marketing and permanent encapsulation to retain that appraised condition you run into a major problem. There are a finite number of coins that really need appraised. Once they are all appraised then what? The only solution to maintaining the business model is to change the appraisal. That immediately invokes the second problem. If you appraise down, the customers will get pissed and stop buying your appraisal. So, the only viable course is to incrementally appraise upwards. That, IMHO, is where we are today.

 

Of course it will all come crashing down at some point just like it did before. As some here may be aware, the coin and appraisal markets crashed in the early 80s. Coins had become vastly over-priced. At that point, the current big appraisal outfit (the then ANA-owned ANACS) significantly tightened their standards. Old appraisals were out and only accepted at very deep discounts. The cycle then started all over again.

 

This is how all capital markets work. They run from severely under-priced to severely over-priced, from bust to bubble. All commodities and securities will rise until the price is so high that no one with sufficient capital is willing to complete a purchase. At that point capital dries up and the market crashes. It is fundamental and inexcapable. Your only recourse is to recognize the cycle and avoid the inevitable slide.

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It's all too much risk for a hobby for me. I don't think I'd buy anything in slabs sight unseen these days. I hope they never figure out a way to get it to stick for ancients.

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And now we have CAC to grade the graders.

 

And this falls in line with what rittenhouse stated....."As to your first point, it was bound to go overboard. Think about it. Once you convince customers of the need for a professional appraisal for marketing and permanent encapsulation to retain that appraised condition you run into a major problem. There are a finite number of coins that really need appraised. Once they are all appraised then what? The only solution to maintaining the business model is to change the appraisal. That immediately invokes the second problem. If you appraise down, the customers will get pissed and stop buying your appraisal. So, the only viable course is to incrementally appraise upwards. That, IMHO, is where we are today.

 

They have pushed the grades as high as they can, only other viable option was to create a company to grade the TPG's. I hope the slab market one day falls and dies a fast death.

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Do you wanna know what I really think of TPG's ;)

 

I've seen it before, and we'll always see it again. I've tried avoiding it when I make my threads, but if it's okay with everyone else, I'd love to hear it from Dave again :ninja: It's been a few months I think.

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Be careful what you wish for. When I say the market will crash, I mean the whole coin market not just US slabbed coins. Do not make the mistake of looking at capital markets as isolated silos, they are not. Witness the "sub-slime" housing fiasco. Some financial geniuses tried to make the case that this was isolated. Obviously it isn't. Nothing is isolated, all markets are interconnected to some extent via their impact on the overall economy. And within market segments, the sub-segments are even more connected.

 

In US coinage, the over-pricing (over-grading) in the slab market by definition will cause the same over-grading in the "raw" market. Raw coins are simply those coins which are either too cheap or too damaged to slab. But the slab grading is definitely extended to those coins by simple comparision. Say a key or semi-key is valuable enough to slab, if it is slabbed VF (for example) dealers and collectors who can grade will extend the quality level they see on the slabbed piece to the raw piece. Thus all coins are eventually over-priced and when the inevitable downturn occurs it will hit all coins.

 

World coins and ancients may be hit less as friends tell me the over-pricing is not quite as rampant (the exception being Russian, but that is driven by the booming economy there coupled with the new opportunity to own one's hertiage). However, as captial dries up, people will sell whatever thus driving down all items. Witness the downturn in the housing market which caused a downturn in the securitized debt (straight mortgages, CDOs, SIVs, etc.) which caused a spill-over to stocks to raise capital (sell what has profit to recoup losses) which caused a spill-over to oil and gold (ditto:sell what has profit to recoup losses).

 

In sum, when the economic dislocation is significant enough it will cause all markets to fall. The only question is to what extent. Coins, as with other collectibles, are extremely sensitive since they are capitalized by discrentionary income ("entertainment money"). Reduce, or even create the impression of reduced, discretionary income and the captial dries up in a heart-beat. Couple that with over-pricing and it will get nasty.

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In sum, when the economic dislocation is significant enough it will cause all markets to fall. The only question is to what extent. Coins, as with other collectibles, are extremely sensitive since they are capitalized by discrentionary income ("entertainment money"). Reduce, or even create the impression of reduced, discretionary income and the captial dries up in a heart-beat. Couple that with over-pricing and it will get nasty.

 

 

So you are saying now is a good time to sell, and once the recession hits and the market tanks it'll be time to buy

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So you are saying now is a good time to sell, and once the recession hits and the market tanks it'll be time to buy

 

Depends on the material. Quality early US type coins will not crash. Problem-free key dates will not crash. Everything else? Who knows.

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No one can call the top before it happens. The only way to tell is to watch what happens. When you see top quality stuff fail to make new highs in auctions and the market turns from "white hot" to knowledgeable people saying it's a bit soft, that's the top. I think it's getting close and with the downturn in the world economy it could get nasty if the downturn is extended. Many collectors are new to coins and haven't seen a drop. Could get interesting.

 

As far as selling, that's up to you. I treat all markets the same. I like to sell when I feel prices are strong. Others like to buy and hold. That's fine too as long as you can stand the pain of a big fall.

 

BTW gpnyc, when the fall comes everything will fall. Happened before, the early 80s were very painful and the early 90s weren't too pleasant either. However, that did lead to some great buys.

 

Also be aware that "prices" don't look like they change much, at least initially. What changes is the grade necessary to bring the price (one of my pet peeves of the coin market). It will take what used to be called an AU to bring XF money, etc. In the early 80s, overgraded 65s suddenly became 60s.

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In US coinage, the over-pricing (over-grading) in the slab market by definition will cause the same over-grading in the "raw" market. Raw coins are simply those coins which are either too cheap or too damaged to slab. But the slab grading is definitely extended to those coins by simple comparision. Say a key or semi-key is valuable enough to slab, if it is slabbed VF (for example) dealers and collectors who can grade will extend the quality level they see on the slabbed piece to the raw piece. Thus all coins are eventually over-priced and when the inevitable downturn occurs it will hit all coins.
Also be aware that "prices" don't look like they change much, at least initially. What changes is the grade necessary to bring the price (one of my pet peeves of the coin market). It will take what used to be called an AU to bring XF money, etc. In the early 80s, overgraded 65s suddenly became 60s.

 

I completely understand the angle you are coming at with regards to the market. However, there are a few items I would disagree with you on. First of all, you make the following statement: "Raw coins are simply those coins which are either too cheap or too damaged to slab." I couldn't disagree with you more on the subject. But that is not the issue of here...Grading Services "BS" is. :ninja:

 

Generally, I believe we would agree that there are two sides of the spectrum with regards to grading. You have the "market graiding" which you termed as 'slab grading", and then you have the "technical grading" which I would term more of a "standards grading". Now, before going any further, any more said on the subject would be moot if we did not understand and agree that there are no actual "standards" in numismatic grading. In the realm of "standards grading", there is disagreement. As well, in the realm of "market grading", there are differences.

 

Because the differences exist, we are posed with the fact that each TPG has a different reputation, and the same coin from TPG to TPG will very likely vary in grade. Even within a TPG, dependent upon apparent "market conditions" the TPG interprets, the same coin within the same TPG at different times in the market, will vary in grade. Sometimes, the difference will be minute, others, it could vary greatly. If I am not mistaken, we agree on this point. And I believe that is part of the TPG "BS".

 

The same coin can be resubmitted any number of times until the coin is graded at the acceptable market gain the submitter is desiring to obtain. This is one of the prime caveats, in my opinion, with "market grading". Yet, this is not necessarily a conspiracy of the TPGs so much as it is an inherited trait of the original Shelby system of grading. Coins of like condition and desirability should sale at similar prices.

 

Thus, you have a system where, instead of dramatic price changes for the same graded coin, you have the coin grades dramatically changing to reflect the desired price. The level in which the TPG grades by a given and/or accepted "standard" (and thus the level in which the TPG grades according to a technical standard) gives more stability and consistency to the grades assigned. This is why when looking at varied auction results or wholesale price listings, we see a difference in which collectors and dealers are willing to pay for a particular TPGs coins, sight-unseen.

 

Up to now, I believe we may, for the most part, be in agreement. However, here is where the hairs split. I do not believe for a moment that "raw" coins are simply those that "could not make the grade" with a TPG. Nor do I believe that the TPG market directly affects the raw market to the extent that you infer.

 

It is true that there are a vast number of "get-rich-quick" pseudo-investors in the "game" getting involved with no idea of the basics involved with numismatics. Many of these people will pump the market, believing they will make that quick short-term buck, then dump. Many times, these coins will dump at a loss, and the "investor" will simply count the loss and move on. You also have the market being saturated with the "coat-catching trend follower". These are people that have bought into the hype of such recent U.S. releases as the State Quarters and Presidential Dollars programs. Ignorance means uneducated, unenlightened, or uninformed. I will use it thus following.

 

The "coat-catching trend follower" is normally ignorant with regards to numismatics, and is just riding the wave of a current trend. It is the responsibility of those of us knowledgeable in numismatics to educate and enlighten them. The unfortunate thing is, instead of doing so, many "pro" collectors simply tell them to "buy this TPG slab" or "deal only in this TPG slabs" or "buy this slab, study it, and learn from there". Slabs and TPGs have become the new numismatic scripture for many, even seasoned pros in the hobby. This is unfortunate, because true knowledge and wisdom in numismatics can never be substituted by a 'quick-fix" course on slabs and TPGs.

 

I believe this is where the problem lies. The reliance in the TPGs. This can only, in the end, cause a mass disillusionment with numismatics. it is this disillusionment, in my opinion, that will cause the next crash in the numismatic market. the pump-and-dumpers and coat-catchers that have entered the market in mass will desert the market in the same manner. The sudden rise in "market prices" that have peaked recently, will see a sudden and long term crash in the market.

 

This could be a good thing, just as much as it could be a bad thing. It will be a "good thing" in the fact that those who are expecting and ready for such a crash will be able to jump on and devour everything in sight in the newly created bear market. The bear market is great for collectors, bad for investors. Those that recognize the current trend see that the currently apparent bull market in numismatics is only a manipulated psuedo-trend that will be realized soon enough.

 

I do not believe, however, that the raw coin market is going to be overtly effected by this upcoming crash. Just as the auction and wholesale pricing trends vary between raw and TPG graded coins, a crash will affect each differently as well. As I stated before, the market has been saturated with two "new" groups of investor/collectors who are for the most part ignorant of the markets. New TPGs and "services" (such as CAC) have evolved from this influx of interest in numismatics, the ramifications of which are just now really starting to be felt in the industry as a whole.

 

The hardest hit will most likely be all of the "modern" series, as well as the "classic" gold and silver series. In my opinion, the classic copper and nickel series that are still, for the most part, in obscurity, will be hit less. The obscure denominations will also not take as hard of a hit from the crash, in my opinion. For the seasoned hobbyist, this will create the chance to add some of the more "abundantly" available series (Morgans, Peace, St. Gaudens, as well as moderns) at dirt cheap prices, while not being overly affected in the more obscure series.

 

A collectors' heaven! Yet, at what price? After each crash in the market, investor/collector confidence will take longer and longer each time to revive. TPGs will most likely be hit the hardest, especially since the industry will be filled more with the seasoned hobbyist, who will be more careful and knowledgeable with regards to grades, since they will know what they want and what they are willing to pay for it. Although this may overall be a good thing, since only the respected TPGs will most likely survive such a bear market, the coin industry could very well stagnate for quite a long time.

 

And because the industry will be filled with the more seasoned pros, less of the more desirable pieces will most likely be available, raising the prices on some of these more problem-free coins. At the same time, the more problematic coins will probably lower in price, since the demand for them will have fallen dramatically as the pseudo-investor and coat-catcher exit the market.

 

This is the overall "BS" is see that the TPGs are causing. Yet, as I said, the TPGs are not so much to blame as many of us ourselves are for not taking the proper time to help educate people directly. The numismatic idolatry practiced by many purporting the TPGs to be some sort of numismatic "gods", if you will, doesn't help either.

 

Food for thought.

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SMS, we agree on most points. We do not agree on raw grading and pricing. The marketplace says that they too are affected by the grading standards used by the TPGs. What passes today, either slabbed or raw, as a high AU was a nice VF30 - 35 in the mid-80s or a decent XF40 in the early to mid-90s. Perhaps disappointing if you are a current buyer, but very nice if you've collected over that period and are a current seller.

 

We definitely do agree on the crux of the TPG problem: many current buyers rely solely on the TPGs without question. Very bad. Is it "their fault"? Maybe, maybe not. Most people, including dealers, cannot grade. IMHO, that's what made coins so fun during the late-70s to mid-90s or so. But, if you can't grade you probably shouldn't be buying. Or at least shouldn't be buying the highly grade sensitive US.

 

We also agree that the TPGs are not "technically grading" rather they are "market grading" - i.e., "worthing" coins. If they feel a coin should bring 63 money, it gets a 63. I disagree with this, as apparently you do. My pref would be tech grading and let the market (buyer-seller) decide the price. But then the TPGs wouldn't be able to maintain their business. Would be nice if the ANA and other so-called collector orgs would set up to the plate and standardize the grading, but I don't see that happening. The dealers have too much influence and that would be contrary to their interests.

 

As to what will fall when the bubble does burst, I can only observe what has happened previously. Beyond that I have no opinion (yes, I am one of those "market agnostics" - I have no opinion other than what the market has shown). In past falls, the most common stuff got the the biggest haircut (obviously) but everything else got a nice "high and tight" too. The so-called "under-appreciated" series like dueces, 3 cents, etc. also got quite a whack. Under-collected series have always been less popular and less popular is less popular during a fall too.

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We definitely do agree on the crux of the TPG problem: many current buyers rely solely on the TPGs without question. Very bad. Is it "their fault"? Maybe, maybe not.

 

 

Relying on someone else to grade your coins in my estimation would classify one as an investor, and not a collector. That is the paradox of this whole issue, that collectors and investors get merged into one element, when in fact in my opinion they are not.

 

Definition of a collector is one that appreciates the beauty of a coin, researches it, knows a lot about it, it's diagnostics etc. They know what to look for in forgeries, grading etc. They usually keep pieces long term, or until they find a better example.

 

Definition of an investor/speculator, one that relies on other opinions about a coin they buy perhaps in the prospect of selling the coin at higher price later on.

 

But I believe most of us have both characteristics, myself included.

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On an investor forum some years ago somebody reported buying a hundred MS64 double eagles

He did not stop a moment to consider how easy it was to get 100

When he sold them the spread ate like 8000 dollars out of every 10 000 dollars gain

and he did not understand it

I told him if he wanted to buy coffins to go MS66 at least :ninja:

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Relying on someone else to grade your coins in my estimation would classify one as an investor, and not a collector. That is the paradox of this whole issue, that collectors and investors get merged into one element, when in fact in my opinion they are not.

 

Definition of a collector is one that appreciates the beauty of a coin, researches it, knows a lot about it, it's diagnostics etc. They know what to look for in forgeries, grading etc. They usually keep pieces long term, or until they find a better example.

 

Definition of an investor/speculator, one that relies on other opinions about a coin they buy perhaps in the prospect of selling the coin at higher price later on.

 

Interesting but not what I see in the marketplace.

 

The investors that I see tend to be quite astute, at least as far as price potential and risk. While they may seek the second opinion, it is only used to confirm their analysis. They have their place in markets and I do not object to them. Bruce Moreland and a few others come to mind. Of course, you could mean "investor" in the common disparaging sense of someone who enters a market with no study because they've heard they can make money. That's not an investor, that's an idiot. Sometimes a lucky idiot, but idiot nonetheless. They're relatively harmless since they get flushed quickly.

 

I do know quite a few advanced collectors and experts in several collector fields, most folks are not of that level. And while all certainly collect because they appreciate what they collect, many are not terribly good at spotting forgeries or grading, etc.

 

At least as far as US collecting, most of the less capable or less studious collectors and particularly new collectors seem to like TPGs for what they feel is the second opinion. As others have noted, here is where the problems lie. Not being able to see the shift in grading or being so new that they haven't even had the opportunity to see it, they can't grasp that the appraisal standards have changed. New collectors would seem to be particularly vulnerable. They don't know any grading but what they currently see and they've never seen the previous downturns.

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On an investor forum some years ago somebody reported buying a hundred MS64 double eagles

He did not stop a moment to consider how easy it was to get 100

When he sold them the spread ate like 8000 dollars out of every 10 000 dollars gain

and he did not understand it

I told him if he wanted to buy coffins to go MS66 at least :ninja:

 

 

Especially with the Libs, they are quite scarce after MS64, AnacondaRareCoins on eBay has them from time to time, I think once I saw a 67 but they are phenomenal in price. There are actually quite a few more MS Saints, because many of them were crated and shipped to Europe by the wealthy back in the late 1920's early 1930's and never really had a chance to circulate.

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At least as far as US collecting, most of the less capable or less studious collectors and particularly new collectors seem to like TPGs for what they feel is the second opinion. As others have noted, here is where the problems lie. Not being able to see the shift in grading or being so new that they haven't even had the opportunity to see it, they can't grasp that the appraisal standards have changed. New collectors would seem to be particularly vulnerable. They don't know any grading but what they currently see and they've never seen the previous downturns.

 

My biggest issue with the TPG's is the variables that occur on grading the same coin, the different prices for different holders etc. Most of us now know what companies to avoid like the plague, and they only serve for the bottom feeders of the hobby now, those that know little or practically nothing about grading, but fall for the HSN style hype. It is generally recognised that about 2-3 TPG's are top tier when it comes to grading, but many even here in this group will share that they have noticed variations in what grade is assigned a coin when the crackout party occurs.

 

I notice several local dealers go so far as downgrading and down pricing a few of the bottom feeder TPG's, no naming names though.

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My biggest issue with the TPG's is the variables that occur on grading the same coin, the different prices for different holders etc. Most of us now know what companies to avoid like the plague, and they only serve for the bottom feeders of the hobby now, those that know little or practically nothing about grading, but fall for the HSN style hype. It is generally recognised that about 2-3 TPG's are top tier when it comes to grading, but many even here in this group will share that they have noticed variations in what grade is assigned a coin when the crackout party occurs.

 

I notice several local dealers go so far as downgrading and down pricing a few of the bottom feeder TPG's, no naming names though.

 

That is a significant problem, not only to the bottom feeders and scam artists but also new collectors. Consider a new collector entering the market and they see prices differeing by, say, $50 on an XF. The immediate temptation is to buy the lower price not realizing that the grading isn't up to the already inflated standards. Now that's really sad. Geez, it's gotten to the point where at least US coins are worse than trading penny stocks on the Toronto exchange!

 

The HSNs are simply disgusting. It's predation pure and simple. If this was securities they'd all be in the slam and have Bubba the proctologist as their new boyfriend.

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Especially with the Libs, they are quite scarce after MS64, AnacondaRareCoins on eBay has them from time to time, I think once I saw a 67 but they are phenomenal in price. There are actually quite a few more MS Saints, because many of them were crated and shipped to Europe by the wealthy back in the late 1920's early 1930's and never really had a chance to circulate.

 

Yes american and english dealers come monthly to Brussels to buy back those uncirculated Saints

My grandfather left me half a dozen in MS64 or better

 

It is like those Vrenelis which are coming by the thousand from Suisse bank vaults

So pristine that MS64 is about the lowest grade

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