hone your grading skills -- 1839 large cent

Discussion in 'US Coins Forum' started by Leadfoot, Jun 13, 2009.

  1. mikenoodle

    mikenoodle The Village Idiot

    Mike, I am in agreement with you on this one. Market by any definition refers to a place where buying and selling occurs.

    If that is so, then market equates to value of some sort and in that regard leadfoot is exactly right.

    I know, you have explained it a million times Doug and we both usually just give up because we get stuck in this same place.

    I think that the sticking point between Leadfoot , me, Doug et al seems to be sticking on this particular word. Whenever we go down this road it seems to me that we all basically agree but get stuck on this one word.

    That being said I would like someone to explain to me how the term market can refer to anything non-commercial.


    mike noodle
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    GDJMSP Numismatist Moderator

    As I have explained many, many times and everybody always seems to forget, when market grading was adopted by the numismatic community, the value of the coin played no part whatsoever in determining the grade of the coin. Market grading was first developed and adopted by both the ANA and the TPG's at the same time - in 1986. Both the ANA grading standards and the PCGS grading standards are written out in their entirety, and nowhere in ether book will you find a single word that says that the grade is based upon the value of the coin. The grade in both sets of standards is based on, and ONLY on contact marks, hairlines, quality of luster, eye appeal and quality of strike.

    Way too many people are of the mistaken belief that the only thing that differentiates market grading from technical grading - and those are the only two grading systems there are - is that market grading is based on the value of the coin, that market grading is a pricing system and not a grading system. This is absolutely not true !!

    It is only in recent years that people have tried to explain what market grading is by saying that it is based on the value (or price) of the coin instead of the condition of the coin. There are 2 reasons I can think of for this - 1 - they don't understand what market grading actually is, and 2 - they are making excuses and coming up with explanations for grades being assigned to coins that don't deserve the grade - over-graded coins in other words - and trying to stick up for the TPG's and delude themselves into believing the grades are accurate.

    In the past I have tried my best to explain what the actual grading criteria are for the two systems of grading so that people might understand the real differences between market grading and technical grading. But some never seem to grasp it. Instead they choose to believe that market grading is simply a pricing system because that allows them to explain the grades assigned when the assigned grades are too high for the condition of the coin.

    So this time I will try something different. The following are verbatim quotes from the PCGS grading standards book. And it's kind of hard to argue with black and white.

    According to the PCGS book there 3 classifications of coins - Uncirculated or Mint State coins, Proof coins, and Circulated coins. That's it. Their definition of a circulated coin follows -

    " These are coins that have undergone wear, however slight, as a result of use in circulation or mishandling. .........." (the bold is mine)

    Now given that definition, it becomes obvious that all of these coins that we have been discussing recently, that clearly show signs of wear on them, are indeed over-graded even according the very standards written and supposedly followed by PCGS.

    This next quote deals directly with the value aspect of a coin. It is a pretty straightforward and undeniably clear comment. There is no room for misunderstanding or interpretting it differently to mean what you want it to mean.

    " From the outset, PCGS dedicated itself to standardizing grading, so any fluctuation in the value of a coin would be limited to price swings, rather than to market related changes in grade. A Mint State-65 coin would still be the same in any market - hot, cold or neutral. The price might change but the grading would not - and could not - becuase the coin was encapsulated along with a unique serial number and fixed grade." (again the bold is mine)

    Now, please, go ahead and tell me that I am wrong and that market grading is based on price and not condition. And then I will say to you - horse puckey !
  4. Leadfoot

    Leadfoot there is no spoon

    Call me cynical, but I don't believe words, I believe actions. The TPGs say they don't grade artifically toned coins (lie) and designate coins as first strike that aren't. Words are cheap, actions tell the real story. So please don't try and use the TPGs words to bolster your argument. Look at their actions.

    And their actions, IMO, suggest that they rank/price coins. Call it technical grading with a market-based bump at the end. Call it pricing coins, call it ranking coins, call it whatever you want, it's market reality. Let's use the coin posted in this thread as an example....

    I don't think anyone would argue that this coin is uncirculated -- there is clear high-point wear. However, if you stack this coin against the other AU examples, it would clearly be better than most of them. The EAC would call it a "choice" (or "nearly choice") AU and its value would be affected by labeling it so. PCGS called it an MS 62. The ANA would call it "AU" and lump it with the rest of the AU coins. And guess what -- everyone would price/value it about the same regardless of the grade.

    So you can talk all you want about how the TPGs are *******izing grading, overgrading coins, and such things, when at least to me it doesn't matter. Grades are only a means to an end -- pricing coins. Their value lies in their ability to predict prices. Given this is the case, I would argue that the EAC and TPG way of grading is actually better than the ANA grading standards because they take into account the technical attributes of a coin as well as the aesthetics/value. In reality, the ANA grading standard does not -- if a coin has AU wear, it is an AU coin, period. However, that's not how the real coin market works, that's not how collectors decide what's the right price to pay for a coin, and that's precisely why the ANA grading standards have, by and in large, been supplanted by market grading, IMO.

    Lastly, you are wrong in how you describe market grading, IMO. You suggested some would put forth that "market grading is based on price not condition". I would respond that market grading is based on price AND condition. To use the 1839 as an example, it is an AU coin that is valued as a low MS coin because of it's condition AND it's price/rank compared to other AU coins. The TPGs call this MS 62, the EAC calls it Choice AU, and the ANA would call it AU.

    And they're all right....Mike

    p.s. Please don't presume that I don't understand what you're saying. There's no need to belittle me or my knowledge/understanding. I get it. I just disagree.
  5. Leadfoot

    Leadfoot there is no spoon

    IMO, value affects grading to the extent that eye appeal affects grading. Said a bit differently, TPGs interpret eye appeal as a way to both positively and negatively affect grades. Eye appeal is also, by far, the most subjective of a coin's qualities. I think sometimes this is overlooked when people say that TPGs allow value to affect grading. I don't think that's true -- IMO they look at the technical merits of a coin then use eye appeal to revise the technical grade upwards or downwards. While the net effect is as you suggest ("value should never affect grading, but it does"), it is the way that it happens where there is some disagreement.

  6. tmoneyeagles

    tmoneyeagles Indian Buffalo Gatherer

    I'd like to believe that value has nothing to do with a coin's actual grade, but I can't say that I do.
    I think a coin's grade should be it's grade, and it is based solely on condition of the coin, and the grading standards, and should have nothing to do with the date of the coin or the mintmark, but it does.
    Value affects the grade of the coin, and this can be seen on slabs, a couple weeks ago, I will use Rusty's thread on the 1877 indian cent as an example, it was graded F15, and was barely a VG, THAT HAD EVERYTHING TO DO WITH VALUE OF THE COIN! I guarantee it would have graded G4-VG8 if it wasn't a 1877, but it was, and therefore was bumped. We see this all the time in the market place, with key dates, and toned coins, and it just happens, which should make people want to learn to grade coins accurately themselves, rather than just trusting a TPG opinion.
    Yes having the coin graded gives some kind of insurance, but to what extent? This is why it is best to know how to grade your own coins, and make sure the slab matches your grade, if the slab is too high, then pass on that coin, there will always be another

    GDJMSP Numismatist Moderator

    Mike I don't disagree for one second that they are doing it - it is patently obvious that they are. But they should not be based on their own written standards.

    All I am saying is that what they are doing is not market grading. The PCGS standards are market grading and the ANA standards are market grading. I don't know what to call what they are doing, I just know it isn't market grading. That's all.

    By all means coin a new term for it - I guess pricing is as good as any. The TPG's didn't used to do this, they used to actually follow their standards. By my estimation they have only been assigning grades based on price for the past 2 years or so. And you say to look at their actions, fine do so. A close scrutiny of most coins in older slabs backs up my point.
  8. Leadfoot

    Leadfoot there is no spoon

    The example you use of the 1877 IHC has a very different cause -- it's not market grading that's being used here. To me, the TPGs use an entirely different standard when it comes to key dates like the 1877 -- almost like they get a grade or two bump because of the DATE not the PRICE/RANK.

    So be careful using the 1877 as an example of market pricing. Toned coins are a much better example, IMO, of the effect of market grading/pricing/ranking than key dates.

  9. tmoneyeagles

    tmoneyeagles Indian Buffalo Gatherer

    I agree here, TPG give free passes to key dates, and we've seen many examples here on cointalk
  10. Leadfoot

    Leadfoot there is no spoon

    I think we've finally found some common ground. I agree. :)

    "Pricing", "ranking", or "Steve" (inside joke), you can call it whatever you want. As I'm sure you've realized through my posts, I try not to get too caught up in terminology (which I suspect angers people like you to no end :D ). That said, I call "Steve" an effective predictor of prices, and argue that's what is really important.

    As for a recent change in TPG behavior, I disagree strongly. I don't see any major change in grading on behalf of the TPGs in the past two years, and I spend A LOT of time looking at slabbed coins. However, I do see a slow slide that began in the early 90's and continues today. Call it a plan to make quarterly numbers by the TPGs, call it gradeflation, call it a changing market -- again I try not to get too caught up in terminology and rather look at what really matters with a coin -- the actions of the market (i.e. price) are what really matter.
  11. GDJMSP

    GDJMSP Numismatist Moderator

    On that point we shall continue to disagree.

    In regard to price, yes, it is the actions of the market that really matter. But you see, there is a very strong fallacy in the line of thinking that price and grade are the same thing. Think of this - say a given coin, a rarity, graded MS63 sells for $68,000. Two years later that same exact coin, in the exact same slab, sells for $136,000. By your line of thinking the grade of that coin just went up.

    However, if that coin is resubmitted for grading, to the same company that graded it before, the majority of the time that coin is still graded MS63.

    So what does that do to your theory ? The price doubled, but the graded remained static. And there are countless examples where this exact scenario has taken place.

    Further evidence, from 2001 to 2007 the coin market went on a wild ride with prices increasing 300-400%. Given that, any coin graded in 2001 or before should have increased greatly in grade by your line of thinking. But that didn't happen. By your own admission in past postings the vast majority of coins submitted for upgrades do not get upgraded. But if your theory were true, they would have to get upgraded.

    Care to explain that ?
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