Thread ATS about "rampant gradeflation"

You guys crack me up. You're going around and around in circles playing head games because not one of you yet seems to understand these TPGs are like realtors looking at comparables in their databases and accordingly affixing grades to what they in their infinite discretion are determining their markets will tolerate under a system handed to them courtesy of the ANA that's so loose, arbitrary, and ill-defined, it means they can never be held accountable to their consumers for those grades. Why don't one of you finally get that?

 

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I feel cyber bullied by Doug.

 

Because I believe it has nothing to do with grades and everything to do with sales. To get more sales they need to slab or upgrade more coins. In order to do that, they need to give people an incentive to send in their coins by the perception that they will either be easier to sell and or more profitable with a higher grade. It is an illusion that they are performing and will continue to perform until market confidence is lost in their ability to closely relate the value they are claiming a coin is worth and the price realized in the marketplace. Sales are the cause and grading is the effect.

 

If you read the Sheldon Grading Scale, or maybe go to the PCGS and/or NGC websites for more detail (if they provide it), it's pretty well understood that the number of flaws/nicks/scrateches/abrasisons is not QUANTIFIED by a set number for each grade.

Maybe it should be, I dunno.

 

In the extreme, without sales there's no business and with no business there's probably not a hobby (or at least one like today).

In which case the only coin collectors would be the Top 1% or maybe the Top 1% of 1%.

Or maybe grading is the cause and sales are the effect.

Modern economic theory states that markets are most efficient when you have perfect competition: lots of buyers and sellers AND 'perfect' information (or something close to it).

In the case of coin information -- grades -- many of us do not feel comfortable going on our own skills. And while I might be willing to be off 1 or even 2 grades on a $500 Morgan Silver Dollar, I am not going to be willing to be off 1 grade, let alone 2, on a $5,000 Saint-Gaudens.

For all their flaws and problems, the TPGs provide an essential service: increased liquidity and marketability via more information about the coins. Information that is easily verified (the grade on the slab) and understandable. Hence, more information for both buyers and sellers.

I ask myself a simple question: would coin collecting be better off in the aggregate or for most of us if the TPGs didn't exist ? No way !! Certainly not with more expensive coins. For a State Quarter, I don't think most of us care that much if we overpay a bit.

For the experts here, for those of you who treat this like a business and can devote 4 or 6 or 8 or 12 hours a day to all things coins, maybe it wouldn't matter and maybe the lack of information wouldn't affect you except that you'd get better deals (monopoly profits exist when imperfect competition occurs; Economics 101 ).

But for the casual guy who doesn't have that much time to spend on the hobby...for the guy who can spend 10-15 minutes on Ebay or Heritage Auctions....for the person who goes to 1 or 2 coin shows a year or the LCS every few weeks or months...without TPGs you'd have as many satisfied customers as those buyers of late-night/early-morning coin hucksters on TV.

 

I guess I don't understand why you would inflate grades just for the sake of inflating grades? That's why you need a catalyst like future sales. If I'm playing devils advocate here and I owned a top tier grading service, I would definitely participate in gradeflation. Now, I may only raise overall grades 1/10th of a grade per year but I know after ten years, a 64 becomes a 65 and so on. Every ten years I have a created a reason for collectors to either send their coins back to me or chance trying to sell them as a lower grade. If and when market confidence in my company has dropped me to a second tier TPG, I create "exactograde" or "gradesrus" and start the process all over again.

 

Actually, I think that even though there is overgrading (i.e., I don't see where an outside process, such as toning, should allow for 1-2 'grades' higher than the coin itself presents, although it may well be nice enough to command a much higher price than coins of that grade), the slabbing/re-slabbing game can be driven simply by collectors or dealers hearing of or seeing examples of coins that have upgraded and sold well (i.e., improved significantly in the pricing thereof) and they are wanting to get in on easy money. Sort of like how people still sell lots and lots of 'unsearched' rolls of coins on ebay --- it's because people want to believe they have the ability to be 'lucky', that others are not gaming the system against them in any significant way (basically they believe it's a level playing field), and that they have the ability to spot the coins that are 'undergraded'. Basically it's a conditioning that allows intermittent reinforcement (upgrading on someone's coin) to drive behavior (people send in coins they cracked or in a slab hoping to get a better grade); people have to either have a huge number of negatives to decide it's not worth their while or they need to analyze the situation dispassionately to stop playing the game or not get into it. But that's difficult if you actually do know something about coins because there are probably quite a few slabbed coins out there that could either be graded one grade or one below or above, and when you throw in someone's opinion of exceptionality or looks on a coin, there you have more opportunities to get this.

These are my opinions at this time, but I could be wrong because I don't have enough experience. And there are others who are sure to disagree with what I say.

Overgrading due to exceptional quality on a toned coin for the toning itself is just another non-level playing field item that gets people drawn into the game.

 

I agree with you but the whole toning issue is part of my point. If toning wasn't being used as part of the grade then the TPG would not get a piece of the action. By incorporating it into their grading system, they entice people to submit or crack and resubmit in hopes that the toning will warrant an upgrade.

 

That's where their marketing fits in. Market grading is equating grades with their marketing. It's marketing grading, really.

 

No, of course it shouldn't. Nineteen scratches in the field, it's MS63? Twenty, it's MS62+? One carbon spot on the kisser, it's MS61? Killer luster on that MS61, it's MS62-63? No can do. Doesn't mean they can't be consistent, however. I can see any MS coin in any series I'm familiar with and know what two grades it's plausibly in between, and assign my grade, accordingly. In fact, I'll bet most, here, can do that, too.

FWIW, this is how PCGS defines market grading: "A numerical grade that matches the grade at which a particular coin generally is traded in the marketplace. The grading standard used by PCGS." Emphasis supplied.

That's trading, not grading. Enough said.

 

I think the possibility exists in the SHORT-TERM but it can't continue indefinitely. If your scenario occurs, then in theory all MS-64's and MS-65's will be MS-68's or higher, it's just a matter of time.

The Wayne Gretzky Theory applies here: when Gretzky made $900K a year for Edmonton, it was a de facto salary cap.
No other player DARED ask for more $$$.

Same thing with the pristine coins that are already graded MS-68 or higher. Unless they are going up to MS-69 or MS-70, they are an effective ceiling for the coins 2-4 grades lower.

We are seeing gradeflation in the LOWER MS's and AU's and maybe below....but you will NOT -- can not !! -- see low- and mid-60's continually going up, up, and away.

Not sure what you mean by this but again, we are RELATIVELY YOUNG in the history of TPGs -- they've been around less than 30 years, coin collecting has been going on for 100 years -- so I think limits eventually come into play.

I wonder if Wayne Gretzky is a coin collector ?

 

I see your point here.

Me personally....I don't like toned coins. To me, their blotches and blemishes. Maybe I'd like 1 or 2 rainbow toned coins as conversation pieces but I do NOT consider them worthy of higher grades...if anything, I consider them demerits.

So if a coin is MS-64 without toning but gets market graded as MS-66 because of toning, I disagree...but it's not gonna bother me. I just won't buy said coin.

I just started collecting Morgans and there is no way I want anything other than silvery white colors.

 

I look at it more like the frog in boiling water. If you throw a frog in a pot of boiling water, he will immediately jump out but put him in a pot of warm water and bring it up to boil, and he will stay in there and cook to death.

 

But toning is a unique thing -- and one I don't like -- that some people not only like but chase exclusively.

So the TPGs are now incorporating that into their rating system. Again, I don't agree with it but AT LEAST I can visually see why they are taking a coin from MS-64 to MS-66. I may consider it MS-62.

Bottom Line: for specialty designations -- toning, PL, DMPL, etc. -- you can ignore that special designation.

 

I can't tell if you are debating my point or agreeing with it?

 

OK, so they're grading on a curve, so to speak.

Ah, the curve...you never thought it would happen to you (fans of "The Wonder Years" TV show will know what I am talking about ).

I see where serious enthusiasts and purists might not like this because even though I can live with it or without it, I know where YOU are coming from.

But I can accept segmentation and differentiation as long as it doesn't destroy the hobby.

 

Touche.....

But seriously, you're not saying that we're going to keep seeing gradeflation ad infinitum are you ?

Let me use the Saint Gaudens Double Eagles as an example (popular coin and one I am somewhat familiar with). You have that $4 million PR-69 1907 EXR. It looks flawless. It may have been an MS-68 years ago, I forget. Whatever, it's an MS-69 right now.

No way you can have a coin like my MS-65's (pics on this site) graded up to MS-67. Because the MS-66's and MS-67's today would have to be rated up to the MS-69...and even an IDIOT LIKE ME can see that 2 coins, one near-flawless and the other with anywhere from 5-10 markings/bag hits/whatever cannot POSSIBLY have the same grade (assuming toning or other BS doesn't come into play).

What if my coin goes to MS-66 (like to think so, but probably unlikely)? OK...then sits in a holder for 10 years...I wait for Gradeflation like store owners in the 1970's waited for Jimmy Carter's double-digit inflation.....and then I submit hoping for an MS-67? 1 notch below 68's and only 2 below that PR-69 1907 EHR Saint ? Unless the Coin Fairy snuck into the slab in the intervening years and erased a few marks a year, it isn't going to happen. And I don't think it will.

Look, Law of Large Numbers applies here. It's easier to go up a few notches if you are in the AU, EF, or VF categories. Much less so if you are already MS. You have the Twin Ceilings of MS-70 (flawless) and MS-69 (nearly flawless, or you need to spend a minute or so studying the coin to see the flaw(s) if they exist). They are our governing Speed Of Light -- can't be exceeded.

My Gretzky Theory Lives !!!

 

I agree with your point but in this case the "inflation" at least has something visible.

We can debate whether or not twin MSDs that are exactly alike 20 years ago each get an MS-64...and today, because one of them turned with beautiful rainbow colors it gets an MS-66. The TPGs and collectors say YES. You and I seem to be saying NO.

My point is, at least that's a visible reason for the upgrade. Better than the MSD or Saint is graded an MS-64 by NGC in 2004....guy cracks out coin and resubmits to PCGS and gets MS-64 again....waits a few years, sends to NGC and it's now MS-65...waits a few more years, submits to PCGS and now it's MS-66.

THAT I would have a problem with, assuming the original graders of MS-64 weren't all drunk when they graded the coin and it was graded too low.

 

I'd put it more like they're throwing us curve balls, but close enough.

 

Equal how? Value? Aesthetics? One cannot absolutely say that a coin struck with flawed dies is not the equal of a coin struck with unflawed dies. Aesthetics are subjective and value is driven by scarcity and demand.

In bust quarters there are varieties with perfect, early (near perfect), late (flawed), and terminal (highly flawed) die states where the perfect and terminal die states are both worth more, despite the terminal die states being shattered, pitted, and/or with select areas of extreme weakness. This is entirely due to the scarcity of perfect and terminal die state examples. As for aesthetics, there are plenty of collectors who prefer one over the other or who desire examples of both.

Regarding a coin's intended appearance I would ask, intended by whom? The engraver may alter the relief or elements of the original design of the artist. The press operator may deliberately increase die spacing to prolong the life of the dies resulting in a weak strike, or they may deliberately employ cracked dies to get more use out of them. These are not mistakes but rather are evidence of the many hands at work in the coining process. A coin's intended appearance will vary and is a combination of these many deliberate elements.