Third Party Grading and the Novice Collector
by, 08-01-2010 at 10:42 AM (642 Views)
Third party Grading is something that I have not much experience with, since I have spent about a year casually, in the hobby I have gained some impressions through my interactions and experiences and through my reading.
First, I feel that I am more of a hobbyist than an investor, an investor has as his primary motivation for holding coins is to increase or preserve his money. He may appreciate the beauty of a coin, but he does not buy a coin because of its beauty but because he thinks, or has been advised that a coin will probably increase in value.
Third party graders have taken a large risk from the investors equation. Back in the last economic troubled times many who put money into coins as investments found that the coin they were sold as a mint state coin was actually an about uncirculated coin, some coins that were supposed to be genuine turned out to have been altered or to have been counterfeits. These problems turned the rare coin investments into sure losers for investors.
A top tpg will make sure that the grade is a consensus among trained experts, that it is authentic, and that they will back up their opinions if proved wrong. This has probably helped the coin business by adding many new customers who would have shyed away from the market.
This adding of customers helps the demand side of the equation, more customers helps keep prices rising or in a down market, more stable than otherwise would be the case.
To a hobbyist this is a double edged sword, it helps to put more coins in the marketplace, yet it also tends to inflate prices, it gives another benchmark, and frees the local hobbyist from the whims of the local coin dealers wether thru overly optimistic grading when they sell you a coin, or from overly pessimistic grading when you sell them one of your coins.
The problems with tpgs for me, with limited experience, and these impressions will most likely evolve along with experience, are that they do not display in the choices I use, slide folders, 2 by 2 boxes, and small coin stock books, which hold 2x2 nicely but do not have room for slabs.
This is the same problem with the 5 ounce silver bullion that I have, and with some other oversized coins.
I do have a pcgs slab box but that does not hold other tpgs slabs very well.
Another problem that has been much discussed is gradeflation, where key coins or highly sought ones get a bump that is based more on their demand than the intrinsic level of wear shown on the coin.
Another worry, tho it is not much of a worry, is that some submitters to the tpgs are such high volume customers that they get a good customer bump, since their are many tpgers like all businesses they have to cater to their customers, a big hsn type business might submit 20 thousand coins, while Joe collector submits 5, obviously the bigger customer will be more valuable to the tpg and the worry is that the small collector who submits a coin will not be valued for his business.
Overall, the way I have approached slabbed coins is that I will buy them for the same prices as raw ones, if they are something that I want for my collection, so far I have only bought modern slabbed bullion and that is because the prices were right at the same as raw prices, and that I liked the design.
These slabs were only platinum bullion, and since they were rather expensive they sit in the safe deposit box, I might have passed on merely raw platinum bullion but my novice perception is that the slab will help resell some time, and there is a bit of an experiment in speculation going down.
I think so far my feelings for the tpgs are ambivalent, I do not really have a strong pro or anti opinion on them, I think that they are an entity that collectors can so far co exist with, but I do think that there bread and butter are investors and large customers such as HSN which for this collector seems to be a very strange marriage.