Market Grading

I have been in the business long enough to see the industry change dramatically, from the early stages of the “Certified Revolution” to the present where we have a company to grade the graders (Certified Acceptance Corp.©). My opinion is that we have seen grading reduced from being an “art”, clear PAST being a science, to what can be best described as “alchemy”. Try to figure out why Grading Service XYZ slabbed a coin as a “MS64” rather than a 63 or 65 once or twice, and you will understand what I mean.

Today, I perceive the basic current concept of Third-Party Grading to be: allowing certain dealers to sell coins to people who have more money than sense, or who are too lazy or claim to not “have the time” to learn how to grade for themselves. Along the way, we seemed to have forgotten about QUALITY within a grade (see CAC© above). At least this is what a lot of very large, deep pocket dealers who cater to a certain upper crust clientele seem to be operating like. The concept of reducing a coin to the equivalent of a stock or bond can not be explained any other way. They seem to have taken a lot of the “cool” factor out of the equation.

Worse, a lot of collectors seem to have chosen to ignore learning how to grade, or even consider how nice (or not nice) a particular coin looks, surrendering much of their judgment to the whims of a third-party service. The current passion for Registry Set collecting has something to do with this. I have actually had someone say to me “Service XYZ graded it a MS64, so that’s OK” (paraphrasing a bit naturally). This is the equivalent of the old dealer saying, “It’s in the holder”. This attitude has led to the next little dealer ditty, “It’s in the ultimate holder” (translation: it’s over-graded, but will not be sent back in to get graded lower). The reality is that a lot of neat coins have been cracked out, messed with, “improved” (and I do not mean proper conservation, which I have a lot less issue with), reholdered and/or endlessly resubmitted to get that one extra point, just to make money. Let me be clear about this: I can teach a monkey the basics of grading in 30 minutes. Then, all it takes is 5, 10 or 20 years of application to get good at it. Learning to grade properly IS an art, based in science, no matter what anyone says. Much of it is based on perception and opinion. That is why the same coin might be graded differently during separate trips through a grading service - which grade is "correct" then? No two coins are the same, even in the exact same technical grade. And that does not take into account the NON-technical aspects, such as how nice a coin happens to be. That opinion is purely individual and takes looking at a lot of coins to develop YOUR OWN standard. And, that is why opinions about coins differ, even between experience numismatists. The ultimate answer is that YOU as a coin buyer have to learn enough to figure out if the coin you are considering buying is worth spending the money on – even I cannot make that determination for you.

The current approach of “market grading” is in some ways worse. The best explanation of this concept I have seen in a long time was recently penned by Bill Fivaz in a 2009 issue of Numismatic News© (sorry, I cannot remember the precise reference). Basically, it comes down to this: modern third party grading is NOT about determining the technical (physical) condition of a coin, i.e. differential from the ideal, which is the coin "as struck" by a minting facility. It is based upon assigning a VALUE for the coin, based upon current market factors, expressed as a single number that can be catalogued, listed, and looked up in a price guide somewhere (see my comments about selling coins to people who don’t know how to grade above). Oddly enough, this does take into account some aspects of quality, as a superior example of a particular coin in a specific grade will often be graded HIGHER due to non-technical aspects (i.e. toning, luster, perfect surfaces, etc.). Unfortunately other non-technical market factors intervene, such as what coins are “hot” in a specific market, or even the reality of mass marketing (“We need 2,000 MS70 and 8,000 MS69 to sell on TV”). I also suspect that the attitude that, “Gee, the dealer must have thought that this coin was a MS64 – why else would he have sent it in on a Three Day Service?”, sometimes prevails.

A second point follows from this comment: Don’t Be Too Cheap. I have seen collectors turn down a coin offered by a dealer at a show, which is immediately purchased by another dealer at the same price! Learn to recognize a “good deal” – that does not mean the cheapest coin for the grade.

I recently sold a PCGS AU-58 1923-S Standing Liberty Quarter to a knowledgable collector for $2,300. That is significantly above the current "Trends" value for an MS60, however it was totally original, nearly fully struck with a bold date, lustrous and with no significant marks, just a bit of true "rub" across the front leg. This is the kind of coin that in my experience would be graded as an MS61 or 62 in a "red hot" market, or alternatively sold as a "Select BU" raw by a large commercial mail-order dealer, as it certainly did look "New" (and may truly be Unc). More to the point, most coins in a certified AU58 holder that are available in the market don't look as nice, and many don't actually grade better than AU55 in my opinion.

Unfortunately, I know a few more specific things that I would like to share, based on “insider knowledge”, but can’t. Reality is that, a) I still have to make a living and that means dealing with some of these guys, and b) we live in a litigious society, if you know what I mean (I think that you can read between the lines here).