Has Grading Gone to Far?

Discussion in 'US Coins Forum' started by Long Beard, May 10, 2020.

  1. Long Beard

    Long Beard Active Member

    Way back in 1949, William Sheldon devised a grading system for large cents which expanded to all series. Known as the Sheldon Scale, the original consisted of 12 grades. Ranging from circulated through extra-fine (8), one simply defined as uncirculated and three mint states of 60, 65 and 70. Coin collectors now had a standardized method of determining a coins condition. With this now acceptable, and rightfully so, the previous prices changed dramatically dependent upon this new system. Of note, third party grading had not existed until 1972 with ANACS becoming the first to encapsulate coins.

    Then, in 1986, coin grading would have another name attached with the founding of PCGS through co-founder John Albanese. Dissatisfied with the company's direction, he founded his own, NGC, the following year. Although Sheldon's namesake remains on the scales still used today, 1987 was a pivotal year which turned the coin market on it's head. A new revised scale grew to 30 grades within the same three categories of circulated, uncirculated and mint state. So essentially, had you bought a mint state 60 in 1985 for say, twenty dollars, and it now graded mint state 63, the price jumped $40. Or it might have gone the other way. What ever the case maybe, prices shifted dependent upon this new scale. And by large percentages. Despite the visions of one man, collectors themselves gave rise to third party grading as we know it. On the flip side though, with PCGS and NGC, investors were the true winners. This was also a time when coins were traded sight unseen based on the grade of a coin. However, it does not seem to apply as today.

    Once more, coin grading has been revised with Certified Acceptance Corporation (CAC) entering the market in 2007. Again, founder John Albanese, has broken down each grade through what's known as green and gold beans. Now, while some believe these to be a good thing, it should be clear that it is nothing more than a perception of the fact. While the advent of the internet may be largely to blame for the demise of buying sight unseen, CAC stickered slabs tend to sell irregardless. Perhaps this is nothing short of the latest craze. But what's interesting about CAC is that the same individual who played a founding role in both major grading firms only certifies from those two companies. Is that simply coincidence? Hardly when a coin grading one grade on the slab becomes higher in value than that of the next. Which contradicts a star at NGC and a plus at PCGS when they are defined as the same.

    So, what am I saying here? With absolute certainty value is set by the market. But which market? With only two choices it is apparent that the collector is in some ways pushed from the market. As if we, the collectors, become irrelevant to profit. Not to be misunderstood, in no way am I complaining as to how things are at the moment. In truth, I see this as a good thing considering non-CAC coins are holding steading or in some cases dropping in price as more and more swarm towards the beans. Pick any auction site and you'll see this. What does concern me, in fact it becomes disheartening, is how grading companies conduct themselves and thereby drive off the average collector. Especially the newcomers. To finish, I ask one simple question. Why can we not get back to what Dr. Sheldon created?
    CaptainMK, capthank, Tater and 3 others like this.
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  3. GoldFinger1969

    GoldFinger1969 Well-Known Member

    I think Doug has something to say on that....:D
    wxcoin likes this.
  4. Magnus87

    Magnus87 Supporter! Supporter

    I’m SURE he does.......
    wxcoin, CamaroDMD and GeorgeM like this.
  5. tmoneyeagles

    tmoneyeagles Indian Buffalo Gatherer

    The market where people are buying coins.

    I was unaware that ICG and ANACS had closed up shop, and that all basement slabbers had retired as well. The market where people are buying coins have decided that PCGS and NGC are the two best choices. The market where people are buying coins have decided that anyone not PCGS and NGC is by and large irrelevant. No one has forced anybody to buy only PCGS and NGC coinage, and both companies would go bankrupt tomorrow if collectors willed it so.

    We are driving their profit. Every time we engage in a voluntary transaction, by where we send off coinage to any TPG, we are making the decision that the value they provide through their service is worth more than the value we have created through our own means, and are holding in the form of dollars, which we will use as payment.

    There are collectors that will only buy slabbed coinage, to boot collectors that only buy PCGS or NGC because they are registry collectors, or believe--rightly so from the perspective of realized prices--that PCGS plastic is worth more to collectors than NGC plastic.

    Their profit does not happen without us engaging in that voluntary transaction to get our coins graded, as well as the demand for said plastic on the market.

    The evil empires of PCGS and NGC cannot just do whatever they want without repercussion. Again, tomorrow we could all decide to stop sending coins in for grading, and stop buying all slabbed coinage. Tomorrow we could all decide this, until those dastardly TPGs clam up and listen to our demands--whatever those even are.

    The most disgusting thing grading companies do is outright refuse to grade coins according to the scale we've agreed upon. Grading is subjective, but not that subjective.

    This is a key date R-5, so wear doesn't matter, MS65+. Excuse me, what?

    We either have a grading scale or we don't.

    I think we have a good balance between a grading scale that allows us to express the details present on a coin, and at the same time a scale that is not overly confusing. We start to upset that balance once we start talking about grades with decimal places in them.

    What we have now is better than a scale with 60-65-70 as its only mint state options. If it wasn't, collectors would stop using it.
    Stevearino, wxcoin, Magnus87 and 3 others like this.
  6. St Gaudens collector

    St Gaudens collector Active Member

    That was 71 years ago.
    I think we learned some things since then.
    GoldFinger1969 likes this.
  7. Penna_Boy

    Penna_Boy Just a nobody from the past

    Yep, we sure have learned. We learned how to pay for premiums like proof like, semi-proof like, star, plus, DCam, UCam, Gem, etc. etc. etc. PCGS, NGC, CAC, et al what will they think of next. ANACS wasn't good enough but what's strange is: all these big names and fancy designations were designed by dealers for dealers. Just my opinion - that's all.
  8. GeorgeM

    GeorgeM Well-Known Member

    I like the Sheldon scale, but I think it's only a matter of time until a broader 100 point scale is adopted. Not only is a rating system out of 70 esoteric & dated, but it's also counter-intuitive to novices and non-coin collectors.

    "Oh, this one has a D-grade? Must not be worth much."
    GoldFinger1969 likes this.
  9. Lehigh96

    Lehigh96 Toning Enthusiast

    You seem to have the opinion that CAC green stickers have raised prices for those coins. The point of the CAC was to fight gradeflation by separating the coins that are solid for the grade from the dreck that represent low end for the grade examples that achieved those grades through years of gradeflation.

    A recent thread on Cointalk addressed the issue of owning a scarce coin whose rarity was reduced by the discovery of a hoard of such coins, which resulted in a drop in value. The sentiment was basically one of bad luck and most people were resigned to the fact that there was nothing you could do about it, but since it was a rare occurrence, it wasn’t that bothersome.

    Now consider the collector who owns a conditionally rare gem grade (MS65) with a population of 50 coins. His coin is valuable and he paid the prevailing price guide price to obtain it. But that same coin has a population of 500 in MS64, making it significantly less rare, and much more affordable, presenting a prime opportunity for the crackout artists to apply their trade. After years of the crackout game, they have managed to get 50 of the 500 MS64 coins to upgrade to low end MS65. As a result, the MS65 population doubles and its value drops, hurting the collector who purchased it before the gradeflation.

    In the eyes of that collector, the CAC sticker helps restore lost value, rather than simply raising the value of the coin as you assert. Unlike the rarity of new hoards being discovered, gradeflation is pervasive in the industry and has attacked virtually every conditional rarity. So while CAC may have increased the complexity of grading by introducing incremental grading, that doesn’t automatically mean its a bad thing.
  10. Cachecoins

    Cachecoins Historia Moneta

    I don't care about grading. I likes it or I don't. I am not looking for the most perfect example of a coin. Chasing a grade is not what interests me about currency. We all approach it in different ways..
  11. GoldFinger1969

    GoldFinger1969 Well-Known Member

    At times, the Balkanization of the coin hobby -- or should I say COIN LABELS -- has gotten ridiculous.

    At the same time, the introduction of the TPGs (and to an extent, CAC) gives you a certain level of confidence that quite frankly would NOT be there if we were relying on the same stuff as 50 years ago.

    I get where vets like Doug and others are coming from, I do. But they represent the 99.999% percentile of knowledgable graders and collectors.

    The vast majority of folks would stick to moderns or bullion rather than risk being burned on numismatics if we didn't have the protections and safeguards we have today that we didn't in 1970.
  12. Kentucky

    Kentucky Supporter! Supporter

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  13. St Gaudens collector

    St Gaudens collector Active Member

    Eventually we'll probably just go to a ranking system.
    One number that will be in the plastic and subject to change like the odometer in your car. It will update rank, population and display serial number every time it is scanned & be visible when you move the holder like your smart watch.

    PCGS, NGC, CAC & most of us may be gone by that time.
    Reminds me of fleas arguing over who owns the dog.
    GeorgeM and Penna_Boy like this.
  14. TexAg

    TexAg Well-Known Member

    Okay, this question has been bugging me ever since I joined CT a little over 3 years ago, and this post gives me the opportunity to ask it. But first a little background. Before I joined CT, my coin collecting was primarily checking the accumulation of pocket change (tossed in a big jar) every few years, and filling holes in my Whitman folders. I never bought a coin, except for a few years when I bought mint and proof sets. I didn’t even know what a TPG was or that you could buy graded coins. I really didn’t care about assessing the grade of a coin, rather I just upgraded my folders when I found a “better” coin (i.e. more shiny, fewer scratches, etc.).

    As I started reading posts on CT, I learned more about grading and even got the Photograde app so I could try my hand at GTG posts. I’ve gotten better, but still consider myself a rookie at grading. With the introduction of W quarters, I have stuck my toe in the water and bought a few graded Ws from the president of our Coin Club. He is an avid graded coin collector, and I rode his coattails on the first few coins. I got even more brave by sending off some other coins to be graded as well.

    Okay, ‘nuff background. Here’s my question for you grading pros out there. Why do we have a 70 point grading scale and don’t use every integer on that scale? I’m particularly talking about the AU scale (50, 53, 55, 58). Thanks for your feedback!
  15. The Eidolon

    The Eidolon Well-Known Member

    I guess the 70 point scale is a historical artifact. We use it because those numbers used to mean something, even though now they mean something a little different. At the high end of the scale, a tiny difference in condition makes a big difference. Having such gradations for heavily worn coins (my favorites!) would be silly, and would tell us little about the value of the coins.

    Personally, as a collector of low-end coins (mostly), I dislike grading because the cost of grading is more than the value of the coin in many cases. I could see grading a few coins so as to make things easier for my heirs to sell them when I'm gone. But if I have no short-term plans to sell, what's the value in tying up a lot of capital getting things slabbed which I could have invested in a productive asset? (Or in more coins!)
    TexAg likes this.
  16. Mat

    Mat Ancient Coincoholic

    ANACS & ICG are still in business, they are just partly closed due to the virus, but they have not folded completely.
  17. Santinidollar

    Santinidollar Supporter! Supporter

    I’m not a grading pro, but perhaps it reflects that grading is not an exact science. I can’t imagine debates over whether a coin is AU53 or AU54, or XF45 or XF46.
    Magnus87 and TexAg like this.
  18. tmoneyeagles

    tmoneyeagles Indian Buffalo Gatherer

    Re-read my post in its original context. Do you really think I was making the claim that ANACS and ICG had closed?
    LakeEffect and harley bissell like this.
  19. Randy Abercrombie

    Randy Abercrombie Supporter! Supporter

    The creator of the system was attempting to create a price guide for large cents.
    G4 is a four dollar large cent
    G8 is an eight dollar large cent
    F12 was a twelve dollar large cent
    So on and so forth. Sheldon’s interests were in creating a price guide for large cents, not in creating a grading scale...... Now when the TPG’s adopted the scale there were modifications and other numbers added to the scale. I can’t exactly remember that part of the history. @physics-fan3.14 knows the history quite well and details it in his book. Hopefully he can jump in and fit the rest of the puzzle together. But @The Eidolon is exactly correct. It is tradition as much as anything else.
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  20. Randy Abercrombie

    Randy Abercrombie Supporter! Supporter

    Had our hobby been effected by the wholesale change the TPG’s introduced back when I began collecting in the 1960’s, I don’t know that I would have stayed with it. There is no way around it in this day and age. If you have an interest in numismatics, you simply have to educate yourself to what the TPG’s do and their resultant affect on coins values...... Now I am something of a black sheep. I am not so interested in a TPG label. In fact, much of my collection consists of coins that have been labeled as damaged goods by the TPG’s. I have several high end and very eye appealing coins that I sourced for a song because of the dreaded damaged label and I am perfectly alright with that.

    My point is that I don’t necessarily fault the TPG’s for taking grading too far. They are a business doing what business does..... I do fault us as the hobbyists for placing more value on a label than we do the beauty of the coin inside.
    LakeEffect, wxcoin, john65999 and 4 others like this.
  21. physics-fan3.14

    physics-fan3.14 You got any more of them.... prooflikes? Supporter

    I do know the story quite well. However, it's even more useful to read the story from Tom DeLorey, the guy who actually did it: https://coinweek.com/education/coin-grading/the-early-days-of-numerical-coin-grading/

    If you have any more questions, you can ask him yourself. He posts here as @CaptHenway
    wxcoin, bradgator2, longshot and 3 others like this.
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