Featured An example of "grade-flation" lowering specific grade market values

Discussion in 'US Coins Forum' started by johnmilton, Jun 25, 2019.

  1. GDJMSP

    GDJMSP Numismatist Moderator

    You make good points in your post John for explaining the drop in prices for specific grades. But that's really only part of the overall explanation for the state of the market. Allow me to explain.

    For about 15 years now I've been writing on this forum, and others at times, about how the TPGs changed their grading standards. But at the same time I also wrote about how people who know coins readily recognized the same thing. In other words, I wasn't the only one aware of the changes that had taken place. For most of that time the majority of forum members scoffed and said it simply wasn't so, that no change in standards had occurred. Eventually things changed, and pretty much everyone, excepting a few diehards, acknowledged that gross changes in standards had indeed occurred and affected the market. But back to the part about explaining the drop in the market.

    As everyone knows the drop began in 2008, but what touched it off ? What happened to make it happen then ? I suppose the initial spark was the general economy blowing up the way it did. I mean the bottom fell out of basically everything. But with the coin market there was more than that to it. And when you stop and think about what has happened since then - there had to be. After all, everything else has recovered rather nicely, but not the coin market. No, unlike everything else it has continued its downward fall. So why ? What explains this ?

    [​IMG]

    Market levels today are where they were in 2003 and still going down. And it's not just the overall market, it's the specific parts of the market as well. For example, look at the gold indexes, they pretty mirror the overall market.

    [​IMG]

    Generic gold - there's your 50% drop.

    Mint state gold, it's not much different, but nowhere near 50%.

    [​IMG]

    But in a relentless downward trend and showing no signs of slowing.

    Now some might say the drop in the spot price is what did it. And yeah, it contributed, but not to that extent. Look at spot price chart for the same 10 years. It looks a bit different.

    [​IMG]


    So what's doing it then, what's causing it ? Well, part of it is what you're talking about - in essence, plastic buyers. But at the same time knowledgeable people, people who know coins, are playing even a larger part. Ya see, as I said above, they noticed the radical change in grading standards the same time I did. And as time progressed more and more of them noticed it as well. By 2007 CAC had come along, but why ? Does anybody really think that was just a coincidence ? No, it wasn't, it was because the numbers of those aware of what was going on had increased to the point that the market needed something else to help sustain it's ride upwards. The founders of CAC recognized this and the company was born, it was a good money making proposition for them. The market was still going up in 2007. But it didn't work for long, those same people who know coins also saw what CAC was doing - rubber stamping coins that didn't deserve the grades they were getting. But the plastic buyers went right along with it. They bought into it hook line and sinker and they outnumber those who know coins by far. But by late 2008 the bottom fell out anyway. And it hasn't stopped yet.

    Ya see, those people who know coins have a greater affect than most give them credit for. They are the underlying factor and when they stop sustaining prices, well eventually it matters. Smart money is almost always the first ones to get out of any market, or at the very least the first ones to stop buying. And without their support, eventually everybody else notices what the smart money has been doing for some time. And once that happens well it's all over. And we see the market do exactly what it has done.

    But there's one more factor, the Grey Sheet, you mentioned it yourself. But did you stop to consider the changes that have occurred with the Grey Sheet ? It's not what it used to be. It no longer reflects the prices and values found on the electronic dealer markets - the actual bids and asks, the sole determining factors of the Grey Sheet for 50 years. Now, instead they use the "magic of market analysts" to determine prices and values. Was that sudden and drastic change an effort to stop the drop ? Was that just a coincidence ? Or was it similar to the creation of CAC ?

    In any event, even if it was, or wasn't, it didn't work, the market has continued downwards. All of these things, combined, are what explains the drop in the market. More than anything else a lack of confidence in the TPGs is what's done it. And that lack of confidence was created by all of those things combined.

    Eventually it'll stop, but nobody knows where yet, or when. But I suspect it will not occur until the TPGs make major changes again and do a full reversal with grading standards, back to the days of 1986-87 when they were first created. In my eyes only something as drastic as that will have the ability to restore any degree of confidence the market has in them.

    Will it happen ? I dunno, time will tell as they say, but I believe it will. Why ? Personally, it's because everything else I've predicted has happened. But there's two ways to go with that. One is the obvious, the other is - I gotta be wrong eventually. Reckon we'll see.
     
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  3. GDJMSP

    GDJMSP Numismatist Moderator

    I suspect that explains the last year of what we see on the 10 year chart for Mint State gold. The timing certainly works and matches up. But it has absolutely nothing to do with the previous 10 years of market drop.
     
  4. medoraman

    medoraman Supporter! Supporter

    I would agree, as well as one other point. Yes, people made money investing in "condition rarity" and "key coins" over the years. They were good runs. However, both of these types of "investments" ultimately have to be tied back to real collector demand. A LOT of "condition rarity" and "key coins" simply are not RARE. With a general decline I see of what I call "real coin collectors", (those people who pay real money for coins, and not simply put aside bicentennial quarters and halves they find in change), the underlying demand is weakening for generic stuff.

    A 1916d dime is NOT a rare coin. In ancient or world coin circle, its so common to be a junk box find. Only with millions of people trying to complete a mercury dime set does it become "rare". I see a lot more people trying to sell grandpa's mercury set than I do anyone trying to put one together. In other words, almost all coins average collectors know off the top of their head as "key", and therefor "will always go up" are massively overpriced and the underlying demand is weakening daily. Same is true of 09s VDB, 3 legged nickels, 1877 cents, etc etc.

    For high grade stuff, you are always exposed to shenanigans of TPGs and their profit motives. I was just offered MS64 St Gaudens for $10 over melt. However, it is not a 64, none of them were. 20 years ago they would be in 63 or maybe 62 holders.

    I am certain what Doug shows for US coins is true. However, for truly rarer stuff like good ancients, truly rare world coin pieces, and US stuff I still collect like Franklin currency notes, prices are up. The best advice I have ever heard was from an old US dealer. He told me what I want to buy is what he does not have in his store. He said any time he gets rock solid, well struck and problem free collector coins he cannot keep them in stock. He was talking about pieces like scarce large cents, bust coinage, scarcer seated dates, colonials, etc. Great pieces that are truly scarce, not just "scarce for a mercury dime" or "a common coin but slightly better condition than average".
     
  5. medoraman

    medoraman Supporter! Supporter

    Come talk to us. Buy from good dealers and fakes are not a concern. We are hostile enough to slabbers that I am unsure if it will affect us much. The only effect they have made so far is raise the price of common crap that they can slab and pawn off on those who do not know any better. We have too many Athenian owls and Alexander tets anyway. REAL rare coins aren't affected by slabbers actions. If I buy one, (for the coin ignoring the slab), I crack it out. Most of us do, so the population of slabbed ancients aren't really growing every year except for common stuff we don't care about anyway.
     
    Mainebill likes this.
  6. johnmilton

    johnmilton Well-Known Member

    Yes, they were all PCGS graded.
     
    Murphy45p likes this.
  7. GDJMSP

    GDJMSP Numismatist Moderator

    Not to get off track here but I readily agree that the market in world coins has exploded, beyond belief even. I first wrote about the opportunities to be found in the world coin market in Numismatic News back in 2003. The increase in values that US coins experienced between then and 2008 pales in comparison to what world coins have done.

    But that's kind of a problem too because I believe the world coin market has far outstripped itself. It's gone up sooooooo much that I believe it has to be due for a major correction - and it's long overdue.
     
    Jaelus likes this.
  8. Conder101

    Conder101 Numismatist

    This comment needed a smilie.
     
  9. wxcoin

    wxcoin Getting no respect for 64 years

  10. johnmilton

    johnmilton Well-Known Member


    You are probably right about CAC. PCGS rolled over really fast when CAC came into existence. Usually when anybody or any company questions their grading in public, they are down their throats instantly. This time they just accepted what CAC was doing, which in essence says that PCGS coins without a CAC sticker are “C coins” and therefore marginal, at best for the grade. That has been continuing message that CAC keeps sending every time they reject a PCGS coin.
     
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  11. wxcoin

    wxcoin Getting no respect for 64 years

    So this day an age do people assume that any PCGS slab without a CAC sticker has been rejected by CAC?
     
  12. johnmilton

    johnmilton Well-Known Member

    Yes, you read stuff like, “CAC has reviewed every lot that appears in Heritage auction.” Does Heritage really send every lot to CAC? I don’t think so.
     
    wxcoin likes this.
  13. ANAlover

    ANAlover New Member

    All of these things, combined, are what explains the drop in the market. More than anything else a lack of confidence in the TPGs is what's done it. And that lack of confidence was created by all of those things combined.[/QUOTE]

    Spot on. The whole post. Greed is killing a great hobby. Whatever is necessary to create a perceived need to send the same coins in for regrading is what has happened. It was always known to have a ceiling by those behind it.
     
    Terrifrompa likes this.
  14. Jaelus

    Jaelus The Hungarian Antiquarian Supporter

    The world coin market is too complex to consider in this way, as it is really dozens of markets reacting to different sets of events (of course, some overlap). Many world markets are still correcting upwards, as potential buyers become more affluent and the true rarity of many coins become known.
     
    thegreatdane likes this.
  15. wxcoin

    wxcoin Getting no respect for 64 years

    So the current owner of a slab without a CAC bean has no way of knowing whether it has been previously sent to CAC by a previous owner and rejected. Over time this coin could be submitted by new owners to CAC. CAC could check their records to see if they already evaluated this coin and reject it without even looking at it again, collect their fee, and send it on it's merry way. Who benefits here other than CAC?
     
  16. Santinidollar

    Santinidollar Supporter! Supporter

    Interesting question. CAC’s public directory won’t tell YOU is a coin has been rejected, but does CAC keep a private record of such?
     
    Two Dogs likes this.
  17. johnmilton

    johnmilton Well-Known Member

    Nor should it provide that information. It would significantly lower the value of those coins, sometimes unfairly. Some CAC advocates want it because they want to know more about what coins to send to CAC. Such a list would cause major problems for NGC and PCGS. CAC deserves major respect when it becomes a full service grading company.
     
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  18. TheFinn

    TheFinn Well-Known Member

    Cheaper to send it to CAC to see if it gets a Gold Bean. That would be worth more than a new PCGS MS64 slab.
     
  19. wxcoin

    wxcoin Getting no respect for 64 years

    I can definitely understand the reasons not to. Eventually, any PCGS or NGC coin without a CAC bean will be considered over graded and most likely be valued at the next lower grade.
     
  20. johnmilton

    johnmilton Well-Known Member

    If it comes to that, this hobby will be toast. It will be a run by a cartel controlled by a cult figure.
     
  21. CoinCorgi

    CoinCorgi Derp, derp, derp!

    You mean @baseball21 isn't running the show currently?
     
    furham and wxcoin like this.
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