Technical grading vs Market grading

thank god for that

 

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I am taking Intermediate Grading at Summer Seminar. I hope to get a better explanation on market grading there.

 

This is all very interesting, but the majority of information posted here is based on tpg propaganda that is designed to relieve collectors of as much money as possible.

If anyone wants to understand what is at play here, get yourself a copy of the 1977 ANA grading standards. That's when the ANA introduced the 70 point abomination on the hobby. Compare that edition with the 6th edition and the difference between technical grading and market grading will become quite clear.

For openers, the ANA no longer has any grading standards. As clearly stated on page 14 of the 6th edition, they simply "report" what is being done in the market by the tpg's, dealers and auction houses. Furthermore, the ANA has lost all credibility due to selling their endorcement to the highest bidder which just happens to be one of the "market graders".

There is no point in trying to define market grading based on the fact that just about every endity involved in grading has their own approach to grading as evidenced by the disparity and inconsistancies between them. If they were all on the same page we wouldn't be having discussions about who is the alleged "best" or "most accurate", and all coins would crossover from one to the other.

The first order in developing a scam is to get the terminology down pat so that it is as confusing as possible. As this discussion clearly demonstrates, those who designed the 70 point grading system and the various offshoots have succeded.

The most concise definition of market grading is "whatever the market will accept" regardless of any particular attributes a coin may have.

 

Well done gentlemen !!

 

While I disagree completely as to why the tpg's came into existance, I'd like to back up a little to present the entire picture.

The 70 point grading system as we know it today was created for the ANA by coin dealer Abe Kosoff. Most of those who contributed to that effort reads like a who's who in the coin dealing business. It was that system that laid the groundwork for those who wanted to manipulate the grading standards. If you noticed, back in 1977, the ANA indicated that using all 11 grades in the MS range would result in miniscule differences that could not be consistantly determined.

Prior to third party grading the primary overgraders in the hobby were the national dealers, of which, many were the same dealers that started third party grading. The mom and pop stores had to rely on local repeat business so it was in their interest (in most cases) to play things straight. I base this on personal experience. My local dealers were not the problem, and the few mail orders that I placed ended up with coins being returned because of overgrading. Incidentally, the same problem exists today with many of the national advertisers.

Third party grading as we know it today did not come about because collectors "demanded" it. The fact is that the ANA already provided all those services years in advance of the creation of PCGS and NGC. Were it not for the lust for the almighty dollar by those who are only interested in playing the grading game, the ANA could more than likely still be handling the volume of coins that actually need to be examined for things other than grade. It was the grade chasers who created the volume that resulted in the sale on ANACS to Amos Press. Back in 1986, before the modern coin grading craze, there was basically a fixed supply of classic coins available to the market. Since the price of a coin is normally determined by supply and demand, and the supply is more or less fixed, the only way to increase prices was to "create" demand. Any significant increase in demand had to come from outside the Numismatic community and in order to "create" the illusion that a given coin was in fact as stated, the idea of third party grading by alleged professionals was also "created".

Before I continue, I'd like those who are reading this to consider how many of the 50,000 coins submitted to PCGS in it's first two months of operation were submitted by "authorized dealers" who were not the ones who were overgrading coins in the first place? How many of those authorized dealers was the leader of PCGS referring to when he sent a letter out stating that the jig was up with regard to selling overgraded coins to telemarketers some 5 years after PCGS was started? Why did PCGS agree to a determination that their services were not as advertised some 4 years after PCGS was started? Why was the leader of PCGS put on probation for questionable coin dealings around that same time? Are those actions consistant with a organization that has the collectors interest at heart???????????????? Give me a break!

Third party grading was created in order to attract investment dollars thereby creating greater demand and therefore higher prices. Higher prices translates to greater profit for those in the business which is why the dealers were all for this new concept. It had nothing, no, make that ABSOLUTELY NOTHING to do with collectors.

Although there has only been two tpg's that have been endorsed by the ANA, that was purely by chance. It wasn't that long ago that the ANA invited bids from somewhere around 11 grading outfits in hopes of upping the ante for their endorcement. We can only speculate as to who they might have endorced had someone been willing to pay the freight. As it turned out even the greedy tpg's wouldn't take part in the greed of the ANA and no bids were submitted. While I'm on the subject, did you happen to notice that in the previous bidding war between PCGS and NGC, NGC's offer was about the same percentage over PCGS' in cash, in submission slots and in volunteer hours as well. What are the chances of that happening with sealed bids?

Is it me or is there quite a bit of confusion in the minds of many in this thread as to what "market grading" really means? Having each tpg functioning under their own standards, or is it their own interpretation of what grading standards are supposed to be, isn't confusing? Having a 70 point grading system that even the alleged professionals can't consistantly function within isn't confusing? A full head SLQ doesn't necessarily have to have a "full" head in order to be called a full head. Nothing confusing there?

The reason market grading survives is because most collectors that came into the hobby in recent years either havent put forth the effort to educate themselves, are confused by a dysfunctional grading system, are mezmerized by the tpg propaganda, or a combination of the three. One more possibility is that all the dealers are in sync and it's either pay the freight or go without.

 

Ill stop at the 1st paragraph. The " Sheldon 70 point scale" was designed by Abe Kosoff? Ok, I'm done reading.

 

Dr Sheldon's "70 point grading scale" was for early Large Cents from 1793 through 1814 only. Abe Kosoff used the 70 numbers and expanded it to the entire series of US coins in response to a request by the ANA for a new grading system. Further, the "grades" determined by Dr Shaldon are not the same as in use today, even on the Large Cents. According to Dr Sheldon, there were 5 1795 Cents that graded MS70!

It might be in your best interest to read the rest of my previous post.

In the future I'll post what Sheldon actually did. It's on my hard drive that died and the info is being retrieved as I post this.

 

Thats fair.

 

No! That's Good-4, maybe Good-6 or VG-8, if the market would accept it.

 

I have Penny Whimsy......no need to post for me tho.

 

in regard to the ana.... i recently completed (in 2006) both grading coins today and grading mint state coins (which include a dvd) when i finished the ana diploma course. the last courses i had taken by the ana was in the early 80's (completing the intermediate studies program). the "recent" grading course is by j.p martin and is very well taught. it is dated tho, being a 1992 production. he discusses market vs tech grading.
my own standard will still equal my TRADING MONEY for COIN. call it a good 4, or ms 70, or even some b. max mehl "a perfect proof", "barely circulated", "brilliant semi-good", and one of my favorites..... "brilliant semi-proof". i just want to be content w/ the price i pd for the value i received.
whether i make money, or lose money (i have done both), it all boils down to my responsibility and decision making.......steve

 

Gee, I thought I did present those points. I stated that Abe created that system FOR the ANA and I made reference to the fact that others contributed to the effort. I suppose in the spirit of full disclosure we should point out that ANA Presidents Virgil Hancock and Grover Criswell also reappointed Kosoff in subsequent years.

I have never thought the 70 point grading system developed by Abe Kosoff and his fellow dealers was a “vast conspiracy”. My initial thinking when it was implemented by the ANA was that there is no correlation between what Dr Sheldon had developed and what the ANA was trying to accomplish. Dr Sheldon chose the number 70 for one reason only. He needed a multiplier of 70 in order for his high end coins to fit into the system he was trying to develop. If the ANA felt that a numerical scale was needed, a scale of something like 25 would have made more sense. Having 11 grades to accurately describe a coin that has absolutely no wear made no sense to me, and apparently the ANA shared that view as they stated at the time “…not even the most advanced numismatists can necessarily agree on whether a coin is MS62 or MS63; the distinction is simply too minute to permit accuracy”. At that same time we had a decent grading standard for circulated coins that the ANA endorsed (free of charge) in Photograde. As history would show, the original Photograde standards needed only a little refining to bring them up to date. Having seen the results of the 70 point grading system, namely that even the alleged “professionals” cannot consistently function within it, that it has given rise to over a hundred “grading entities” who are taking advantage of the fact that the system is dysfunctional, that matters are no better now and in some cases worse than before it was introduced, I’m of the opinion that the ANA’s attempt to achieve their objective was a bismal failure. If “the confusion in grading caused by multiple systems and biased private opinions” has been eliminated by 70 point grading, then why all the discussion about how one grading company compares to another? The objective was to create a universal standard and, by your own admission, one does not exist today. I rest my case.

I apologize for having the wrong date when DH informed his comrades that the word was out about their supplying “viciously overgraded coins” to telemarketers. It was only two years after they had started PCGS, not five. In that letter he referrs to the “past ten years”. I read that as eight years prior and two years after. Such an admission by DH flies in the face of any conclusion that third party grading was motivated by dealer desires to clean up the hobby for the benefit of collectors. In that very letter, the word “collector” is not mentioned. Instead, we see “hard money circuit”, “financial planning community” and “coin investing public” as in big money, not your average collector. As you can see, my “opinion” about why tpg’s came into existance is based on connecting the dots of what limited information one can expect from those who are engaged in activities that aren’t exactly as they would have us believe. That same admission also validates my “opinion” that some of those who started third party grading were the same ones who were part of the problem in the first place.

For the record, ANACS was sold to Amos Press in 1990, not 2002. See, we can both be a few years off when we recall from memory. I also take issue with your opinion that it was sold because they were losing money. Part of the deal included a piece of the action for several years after the sale. If there was no profit, there would be no piece of the action as well.

When the ANA initially “sold” their endorsement it was by sealed bidding. In their latest attempt, the ANA specified the total amount to be paid for their endorsement along with a formula detailing the amount from each service should more than one be selected. That total, if my memory serves me correctly, was nearly double what NGC had been paying in all three areas. That’s how I formed my opinion that the ANA was trying to up the ante. Perhaps you can supply the actual numbers in both cases for all to see.

Having been active in numismatics before and after the time tpg’s came into existance, I do not recall ever seeing where the collector was the driving force behind third party grading. If you can show something other than your opinion, I for one would be very interested in seeing some documentation.

 

As a pure collector, I couldn't agree more! It's almost like the TPG mania was/is created for the novice numismatic investor who's simply in the 'Hobby' for one or two things, Financial Portfolio Diversity and Growth.

One must remember, it's the #1. top TPG which touts being a "Value Adding" service. Apparently, simply existing to separate the rich, independent, good natured, and gullible young professional from their MONEY...
http://www.collectors.com/index.chtml

While typing this I couldn't help but think of that Orthopedic Dr in our Coin Club who's "Over The Moon" with his (50+) MS-70 Gold Buffalo (Bullion) coins... They are in his safe deposit box at the bank so all we've ever seen are some pictures...

Take Care
Ben

 

I have a sneaking feeling that the rise in Au $$$ has eaten up his "70" premium already.........

 

It had "absolutely nothing to do with the grading of coins that PCGS was doing. It had only to do with advertising."

Part of that bogus advertising (that is still being done in a vailed manner today) was that their grading was "consistent", "objective", "unbiased", and that they weren't grading their own coins.

For the benefit of anyone interested, here's the rest of the story straight from the source.


FOR IMMEDIATE RELEASE: August 17, 1990


FTC CHARGES COIN CERTIFICATION CO. MISREPRESENTS
OBJECTIVITY OF ITS COIN GRADING SERVICES;
COMPANY AGREES TO SETTLEMENT


The Federal Trade Commission has charged that Professional
Coin Grading Service, Inc. ("PCGS") misled consumers by falsely
claiming that it provides consistent, objective grading of coins
and that investment in PCGS-certified rare coins eliminates all
the risk associated with the grading of coins. Under a consent
decree filed August 16 in federal district court, PCGS is prohibit-
ed from making false representations about its objectivity, con-
sistency, or the liquidity of its coins, and from making deceptive
statements about the risks of investing in graded coins.

According to the FTC's Boston Regional Office, which handled
the investigation, PCGS was formed in August 1985 by seven promi-
nent rare coin dealers for the purpose of providing a consistent,
impartial, "certified" coin grading service upon which purchasers
and sellers of rare coins could depend. For a fee of approximately
$25 to $100 per coin, PCGS claimed that a coin would be impartially
and accurately graded by several of "the world's top grading
experts."

According to the complaint accompanying the consent decree,
PCGS falsely represented that its grading system is objective, con-
sistent, and unbiased; that an investment in PCGS coins eliminates
the risk associated with the grading of coins; that its coins can
be liquidated easily at reasonable, competitive prices; and that
it observes a "strict anti-self interest policy."

In fact, the complaint charges, PCGS has not provided object-
ive or consistent grading, and coin grading involves a certain
amount of subjectivity. Not all PCGS-certified coins can be li-
quidated easily at reasonable, competitive prices, according to
the complaint, and PCGS does not in all cases observe its "strict
anti-self interest policy." In addition, the complaint charges,
investment in PCGS-certified coins does not eliminate all the risk
associated with the grading of coins.

(More)

Under the terms of the consent decree, PCGS is subject to num-
erous prohibitions and requirements. PCGS is prohibited from mis-
representing that its grading is objective, consistent or unbiased,
or that an investment in PCGS-certified coins eliminates all risks
associated with the grading of coins. PCGS is also prohibited from
misrepresenting that PCGS-certified coins are liquid at reasonable,
competitive prices.

In addition, for a period of two years, PCGS must disclose in
all of its advertising and promotional material that "Certification
by PCGS does not guarantee protection against the normal risks
associated with potentially volatile markets." The decree further
requires that any claims about the safety or security of an invest-
ment in PCGS-certified coins be accompanied by a clear and conspic-
uous disclosure that the rare coin market is highly speculative and
subject to risk. PCGS must also clarify its liquidity claims with
a disclosure that the degree of liquidity, and the availability of
markets for certain coins, will vary from time to time.

The complaint and consent decree were filed in the U.S. Dis-
trict Court for the District of Columbia.

Professional Coin Grading Service, Inc. is based in Santa Ana,
Calif.

A consent decree is for settlement purposes only and does not
constitute admission of a law violation. Consent decrees have the
force of law.

Copies of the complaint and consent decree are available from
the FTC's Public Reference Branch, Room 130, 6th St. and Pennsyl-
vania Ave. N.W., Washington, D.C. 20580; 202-326-2222; TTY 202-
326-2502.

# # #

MEDIA CONTACT: Office of Public Affairs, 202-326-2180

STAFF CONTACT: Phoebe D. Morse, Boston Regional Office,
617-565-7240


(Civil Action No. 90-1982)


(PCGS)

 

That idea is beyond reproach. Who would oppose a single set of standards for all ?

But it requires a majority of the collectors behind it - and passionately pushing for it.

If polled, I bet an overwhelming majority are for it. The question is how to mobilize people and implement it.

"All that is necessary for evil to triumph is for good men to do nothing."

 

i have written letters to the the ana's director of education as well as the marketing director regarding the grading issue. my own personal opinion is that we band together as a force, taking back the ana w members who are vocal and all of us work together to deal w/ coin consumer advocacy problems and problems overall w/ these grading issues. my letters were written in nov. each wrote me back stating "they" would contact me to discuss these issues. i still have not heard from them.

my own reasons for this was that i wanted more and updated courses as well as more distance related courses so that an organized educational curriculum was available for all no matter where they lived and to especially make it affordable. the other purpose was to establish consumer awareness and advocacy because i am so sick of people (especially newbies) falling prey to thieves and cons. we need to educate first and teach people how to buy coins as they progress in the hobby.
since the new elections, i now have 2 board members who live w/in a 90 minute drive from my home. i hope to start a dialogue regarding these issues as well as making the ana an educational organization for all members. there are only 32000 members and i am certain many more collectors than that. the more we organize behind a cohesive, reputable organization, the more we can achieve (more than theory, i hope).

i am willing to help if i can ( i am a very simple collector and have no illusions about how little i truly know in regard improving the hobby. but there are some people on this forum who have vast knowledge and experience as well as the ability to organize and achieve their goals) ....can we get together and start here w/ developing and organizing a plan to help "clean up" our hobby? the less collectors get burned, the more likely they will stay w/ a hobby which can bring them a lifetime of enjoyment. we really need input on this from all....and please no hack and slash dialogue. lets try to center our focus and develop the plan and steps needed to be taken.

sincerely and with much humility (i know how small my knowledge is in relationship to many others here) i simply just want to help......steve