How is gradeflation going to affect the hobby longterm?

Most of us know what gradeflation is: resubmitting a coin to a top TPG repeatedly until it gets a higher grade, thus making the coin more "valuable," or at least, desirable, to collectors and dealers alike.

I have resubmitted coins myself that I thought should have been graded higher, as have many folks here on CT. I had a 1894 PR64CAM Morgan that came back 64+ the first time I sent it in for regrade. I tried to sell it for $5750 at the Chicago ANA and no one wanted to touch it. The big dealers would take a long look, but all passed. The next day I sent it in for regrade again at the show and it came back PR65CAM. I sold it to one of those same dealers within minutes for $7100. Was I happy to move it and free up some money to put into something else I was interested in? - Yeah!

BUT WHAT EFFECT WILL THIS HAVE ON THE HOBBY LONGTERM? I spoke to several dealers yesterday at the Tampa FUN show and every coin they were bidding on in the Heritage auction were coins that they planned to resubmit 20 times in order to get the higher grade. They flat out told me this. Because as they said, they could make $10-$20k once it upgraded.

The U.S. coin market as a whole has been undergoing a slow correction over the past 1-2 years, IMO, as I see the slow down of enthusiasm as compared to 3 years ago. Will this correction continue? Will it pick up pace? Will the TPG'S tighten up grading standards? What effect do you think gradeflation will have?

Here's a coin for the thread. I bought it yesterday, here at the FUN show, for more than AU58 money. 5 dealers told me it was Uncirculated, and one told me it was a solid MS63. Would I ever resubmit it? Uh, no. Not this time. Love the rattler.

 

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Maybe gradeflation will get to the point that microchips are embedded into the edge of a coin which prevents anyone from resubmitting it after a fixed number of times.

Chris

 

Do you have any thoughts on what could come if this, though? Will the price gap between MS65 and MS64 coins (for example) drop considerably as frustration and awareness grows in the coin community? Makes you wonder.

 

What you are describing isn't gradeflation but rather a result of gradeflation--the continuing degradation of grading standards. What was once a solid MS 64 is now considered a weak 65... AU coins with rub are now MS with "stacking friction"...what was once an XF is now an AU (often an upper number AU).

The usual example that I use to demonstrate the phenomenon (bought in 1987)

 

With all of these resubmissions I wonder how it will affect medium grade MS coins in the long run. This should greatly inflate the population reports so that the prices would come down. Experienced collectors probably have a good idea how many actual coins exist for some of the tougher dates so the population reports are meaningless to them. However, newer collectors probably look at population reports too much when making their decisions to buy; especially on the internet.

 

In a free market, everything finds its level. . . .

 

That coin would now be a solid VF30. Nice example.

 

It's a solid VF by the most conservative of standards.

 

Well, I can't tell you what effect it will have on others, but I can tell you the effect it had on me. I've become sinical of the commodity mentality, obsession with investing over collecting, and gradeflation permeating the US coins collecting hobby, so much so that I got turned away from it and fled to the ancient coin collecting hobby, where there is naturally less obsession with grade and more obsession with the historical context, artistic merit, cultural meaning, and political message of coins. You know, things that collectors seemed to have cared about more in the US coin hobby 20-30 years ago than they do now in the era of TPGs and the internet.

 

Yeah I don't think that coin was ever VG

 

There are some of us modern folks who still collect for the fun of it. I know my kids will not get rich of them and that my collection my lose value but I still enjoy my coins.

 

When I started getting back into collecting a few years back I started obsessing with building several collections solely with slabbed coins. Unfortunately, I realized too late that not only was it expensive, I also didn't enjoy the hobby since I was treating everything as an investment. So, I got rid of most of the slabs and have been focusing on nice raw coins to complete collections. My biggest criterion for a coin is eye appeal. Yes I have some raw coins that have questionable color and if graded would get a details grade. However, if I like the coin then I'm the one I'm trying to satisfy. I'm not looking to get a bargain and quickly sell it for profit. Although I'm not collecting ancients, I do like the historical context associated with non-modern US coins. The mint is producing too many specialty coins these days. Maybe they will mean something to younger collectors down the road but for someone like myself who started collecting coins in the late 60's when you would still run across a lot of wheat cents, an occasional indian cent and buffalo nickel, I am still interested in completing collections I always wanted to complete as a kid.

 

I started seriously collecting U.S. coins with a raw set of Peace dollars. I had a trusted seller. When I lost that seller I started considering slabbed. At the same time I started a Franklin set, slabbed. The slabbed killed my interest. Not sure exactly how or why but the interest and passion faded to be rekindled by military trade tokens (which I'm still highly passionate about) and now I've expanded to ancient coins. Coins I can't touch just don't do it for me I guess. Also this:

 

I was just ready an ad that I know has not much to do with this topic but I would like to know if someone could give an answer whether these coins are genuine or not? They are being offered by International Coin & Currency of Montpelier, Vermont. As a Canadian collector and just starting out trying to collect Morgan dollar this company is offering these Morgans for $59.00

The Legendary 1904-O Morgan Silver Dollar, Brilliant Uncirculated -- Limit 2 per household. In 1962, the 1904-O (New Orleans Mint) Morgan silver dollar was one of the three most expensive issues in the series, UNCs listed for $350. Only a few thousand were known to exist in any condition. Then the last U.S. Treasury silver dollar releases stunned the collecting world: hundreds of bags emerged from government vaults containing pristine 1904-O Morgans. Today no other BU in the entire Morgan silver dollar series costs so little compared to its peak price.

 

I only have a handful of slabbed coins. But seeing the game that people play with TPG makes me want to avoid them all the more. I never trust what the number says on the top. Only what my eyes can see.

 

Stanley, yes the coins are probably real and probably uncirculated as well. I don't follow Morgans so I can't say if the price is good or not. One point in the ad is probably wrong though The 1903 O dollar is probably selling for a greater drop from it's peak price.

 

Have grading standards really degraded? I would argue no. They have certainly changed over the years but I wouldn't say degraded is the right word. Remember all those "conservative" grading periods through out the history of the hobby where not only was cleaning a coin acceptable but it was normal, those coins may have had a lower grade but they would have all been details coins by today's standards and many still are.

64 to 65 really isn't a great example either given the subjectivity of grading. We have to remember that one of the ways grading has changed over the years is the constant adding of new grades within the system. As the system adds grades and pluses ect we continue to split hairs more and more between grades. Given the subjective nature of grading to begin with 1 point swings in either direction upon resubmission can be a lot of factors that have nothing to do with gradeflation and can often times just be someone having a different opinion on the subjective aspects of the grade.

There certainly has been changes to grading just like the 1930s graded differently than the 1880s as things always evolve over time for better or for worse, but we do also need to remember we are also comparing two different systems where the current one splits hairs between all the different grades and plus grades and stars that weren't even around when the TPGs themselves started much less 80 years ago. As time goes on I suspect that trend will continue where hairs get split even more between grades where one possibility could be the introduction of fractional grading within a grade.

That does happen unfortunately. Pretty much any population right below a massive value jump is artificially inflated from people trying to get that one point upgrade for the value boost. That of course gives people the idea the supply is much larger than it really is which at best will hold the value down and often times does drive it down.

 

I've heard it many times around this forum and elsewhere:

"buy the coin, not the slab."

 

I guess this could be a good thing for a collector since they could get a good quality coin at a reasonable price since its scarcity would potentially be underestimated. Although, in most instances, long-time collectors would know how often certain grades of a particular coin would come on the market. So even an over inflated grade could demand a higher price than one would expect from an unrepresentative population report. I guess the underlying theme is to know as much as possible about what you are collecting before buying.

 

Thankfully, the coins are completely unaffected by the nonsense that goes on in this hobby.