Featured Market Grading vs. Technical Grading

Question for the seasoned veterans.

When TPGs came on the scene, they began documenting population reports on coins that pass through their hands. Before then, was there such reports? Was there a flood of new coinage that surprised the community, changing the price on some pieces dramatically?

 

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Great question. I was not in the hobby when the TPG's arrived on the scene. Logic tells me that yes, pop reports had to have some surprises.

 

Maybe you can. So can I. We've both put in the time and effort to learn how to. However, neither one of us are the people to whom you were referring--people who are totally dependent upon either some dealer (back in the raw days) or some TPG to tell us what is a good coin and what is a bad one. These people who will still be unable to tell when a raw coin has problems will also be unable to tell if a slabbed coin has problems.

 

Not especially, as I recall. One didn't see the large price swings based on "grade rarities" that one does today, but most knew the "keys" to whatever collection one was working on.

About the same time as the TPGs came about the internet explosion also occurred. I think that this, much more than TPG population reports showed collectors that many coins were much more common than previously believed. For the most part the major TPGs were only seeing either extremely common coins which could be marketed as a generic commodity (which was actually the business mission of the TPGs in the first place) or extreme rarities which most of the experts in those particular series already knew about anyway.

It was a few years later when "everything" had to be slabbed that the huge price differentials between one grade and the next grade up truly started appearing. It's those huge price swings over a totally subjective single point that I most object to.

Don't get me wrong. I think that the TPG age has been an overall benefit to the hobby. Still doesn't mean that I don't think collectors should put forth the effort to learn how to grade for themselves rather than slavishly worship numbers on labels which can and will change if the coin is resubmitted.

Edit to insert missing word which would have resulted in saying the opposite of what I meant.

 

While I don't object to these big price jumps, I use those to help determine what grade I'm going to buy in the series. For ex. if the MS65 goes for $1500 and the 66 is 2x or more, I'll want to focus on finding a beautiful 65.

 

Exactly. But here's the thing. Since the TPGs are an authoritative grading source, if they slab a problem coin is it because they made a mistake or is it because they think the problem is market acceptable (in which case they may have also net graded the coin). They don't put enough info on the slab to make this determination. This is true for net graded coins with positive attributes as well.

For example I have a slabbed AU 53 bust quarter that looks to me like a 50/53+, but the toning is very attractive, especially on the obverse. I can only assume they net graded taking into account the attractive toning, but all the slab says is AU 53. This is where it gets into a grey area and becomes extremely difficult for anyone to accurately predict. I would prefer that TPGs indicated the technical grade as well as attractors and detractors they have identified about the coin, followed by their net grade, since this is most likely what they are actually doing behind the scenes. At least then it would add some transparency and would make mistakes apparent.

Now as I've said I don't particularly care if a coin has a minor problem or not, provided I find it to be an attractive coin and the problem is not distracting. Having said that, I don't want to pay a problem free price for a problem coin either. My issue is determining pricing in that grey area where a coin has a minor non-distracting problem but I'm fairly certain it will still get a grade due to apparent market acceptability.

 

Doug, why do you hate TPGs so much? They really have done wonders for the hobby. All you ever expound upon regarding TPGs are the failures you perceive. How about the many successes? Why not address those issues, instead of a generalized condemnation of services that have revolutionized the hobby?

 

true enough but the market will actually guarantee the coin. there is always the sight unseen market, as well as simple venues such as eBay. sure you pay the 13% to ebay as a casual user but that will likely be more then pcgs/ngc will offer. you could always even throw it away at a show. again still more then tpgs will offer. there is always someone out there who will be happy to get a piece of plastic for a 5% discount.

no one here seems to be asking for a 100% guarantee. but for myself, knowing that certification limits my total exposure to loss is the only reason i buy expensive coins.

 

I fear we are approaching the point at which originality becomes a second grade scale. We'll see "details XF" vs. "XF40 obviously dipped at some point" vs. "XF40 original" vs. XF40 with PQ sticker that's not really that PQ" vs. XF40 with CAC, interesting toning, and a bit of grunge in the 'A' of 'STATES'" give way to XF40/60, XF40/40, XF40/15, and so on, grading originality as a seperate value from numerical grade, but turning into a second grading scale. Grading will then no longer be on a linear scale but instead a Cartesian coordinate system. Price guides will require an understanding of algebra and quadratic equations. Throw in eye appeal, and CAC will introduce pricing based on integral calculus.

 

You constantly demean, in the most emphatic and exaggerated manner, the ability of the TPGs to grade. You have openly stated that your grading is superior to their ability to grade. You point out all of their mistakes constantly, (alleged mistakes), and belittle their ability to match you in terms of ability to recognize coin surface preservation. In addition, you've accused them of setting the market prices (only the buyer and seller can set market prices, as they are the only two parties that have a financial investment in the coin). So, I will reiterate my earlier question, Doug. State specifically what you LIKE about TPGs, instead of the incessant negatives. I am honestly curious to find out what you like about them. This is a gentleman's challenge--please state what you specifically like about them, so that I know that you're not completely against them in terms of consistency of grading.

 

Not at all. A price guide is just that, a guide. All coins are unique and must be judged subjectively to come up with the fair market value; coin valuation is already significantly more complex than price guides account for.

Providing more information on a slab only makes it easier for people to price the coin, not harder. The conditions that modify the value of a coin still exist on the coin whether or not they are described on the slab by the TPG. This means a buyer currently needs to be able to accurately identify all the conditions that would modify the value of the coin to price it properly, despite the grade on the slab.

For example, if a price guide lists a given min/max range for AU, it's based on average sale values. You are going to see AUs that are worth less than the minimum value and also AUs that can go well into the MS range (double the max AU value or more) due to strike, surface condition, and eye appeal.

Not only that, but TPGs already identify strike, surface conditions, and eye appeal with modifiers BN, RB, RD, CA, PL, DPL, FB, FBL, FH, FT, FS, star, etc.. in acknowledgement that these conditions can have significant impacts on the value of a coin within the same grade. There's also the obvious price disparity of two coins of the same grade, one with a green bean and one without. Why does a green bean add so much of a premium when it doesn't change the coin? Simply because the slab grade is frequently inadequate for proper valuation of the coin outside of being an expert on grading the series.

 

Doug, to answer your question, as you did point out some advantages of the TPGs--there are just as many folks who do not think that the grading of TPGs is whimsical, as you suggest. You make it sound as if everybody agrees with you--that Third Party graders are arbitrary, and change standards all the time. MANY folks actively disagree with your statements here, and state it openly--probably as many as support your views. However, we're not doing quantitative studies as to how many people support Doug in his opinions.

The main reason I question your extreme condemnation of TPG grading "inconsistencies" as you call them is your position here. Being the "big cheese," some newer collectors, and some followers will not question your position, as you are one of the most senior persons here--they assume that everything you say is absolute gospel. I am arguing that while there is some minimal irregularity with TPGs, they get it right MOST of the time. That is the important thing--THEY GET IT RIGHT MOST OF THE TIME. The positive grading result is far higher than it was before TPGs, and when word grading scales predominated--in those "bad old days" that some folks do not remember, grading was arbitrary between buyer and seller. I could call all of my coins XF, when in reality, they might be closer to VF or even VG. Nothing questioned my call as "Joe Seller" except for the marketplace, and a lot of people ended up buying coins grossly overgraded or damaged. TPGs have equalized the playing field, so that a third party makes the call, and that third party does not have a vested interest in the transaction between buyer and seller. This is what is crucially important--an expert third party makes grading calls, and not someone who has a vested financial interest in the trading of coins. It is almost like playing hockey without a referee, and letting the teams call the infractions versus, a third party making penalty calls.

Do TPGS blow the call sometimes? Of course--they are human. However, they are far more accurate in most situations, and while variances do exist, they are comparatively small. Some folks disagree with this philosophy, but you make it sound as if it were the entire coin collecting community--that is simply NOT true. Most collectors, myself included, know how to grade, buy coins that they like and do have a basic trust of the third party to make a good call. Would I buy a coin that I knew to be a "bad call" on the part of the TPG? OF course not--I buy a lot on eye appeal and what I like. The adage "buy the coin and not the holder" is certainly partially true. One's own judgement should be the final arbitrator in a purchasing situation. However, it is very nice to have a safety net, so that arms length transactions, unseen purchases, and third party buying can take place with a certain amount of reliability and safety. You think I am stating that TPGs are omniscient--far from that. I am stating that the better ones are reliable, and far from the guesswork of grading by the "word--" Very Fine, vs VF 30 from a company that does back their opinions with a guarantee. I have used said guarantee a few times, and have NEVER had trouble getting my money back--perhaps you have had other results, but I simply have not had the negative experience you describe.

When it comes down to the final analysis, one needs to buy what one likes--however said person looks at it. One needs to be happy with his/her purchase.

 

Ok, now don't go getting all crazy on me, but I AGREE WITH YOU. I don't know if you have ever sent a coin to a TPG for appearance review, but I have. They don't really give you an opportunity in the process to explain why you think the coin is not graded properly. I suppose you could write them a note, but without a discussion about the coin and its attributes, it is simply too easy for them to look at the coin, say "looks good to me" and send it back to the owner with a note saying the coin is graded properly. If they wanted the process to be fair, they should provide a phone consultation with the submitter so they can explain why the claim is invalid.

The only time they will honor the guarantee is when the coin is obviously graded improperly and would be embarrassing and detrimental to their reputation if they don't fix it. I recall an NGC MS69 steel cent a few years ago. It was horribly overgraded and I heard that the coin was removed via the grade guarantee. I don't know this for sure, but the pop reports list no MS69 steel cents so I guess they fixed that blunder.

And when it comes to refunds, they state in their policy that they will never refund more than the purchase price of the coin, so the refund will always be equal to or less than the purchase price. And to your point, I agree, it will usually be less than the purchase price.

NGC COIN GRADING GUARANTEE