Grading from "the good old days" - A question
REALGATOR
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I decided to rip @BillJones title, as it brings up a question that comes to mind:
Exactly what year did the "the good old days" of grading end? In other words, When did "gradeflation" start?
Is it when:
PCGS decided to change from green labels to blue?
NGC put their fat holders on a diet?
ANACS sold out?
Is there a year that we began to say: I cant believe that coin is in a "insert your inflated grade here" holder?
Perhaps its 2003 (15 years ago), but I can't recall.
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In the pre-slab era money was made in coins by buying at one grade and selling at another. Essentially, gradeflation has always been around but it has just changed how it operates.
**In the pre-slab era money was made in coins by buying at one grade and selling at another. **
I imagine this type of arbitrage has always existed in the coin business.
This.
I recall dealers bragging about selling (raw coins of course) at Bid.....the only problem was, their XF's were really VF's.
You can bet they were VF's when they were purchased
I don’t think that you could ever put a date on it, not even within a year, five years or even a decade. The “rattle holder” era was supposed to be the time when everything was very conservatively graded, sometimes OVERLY CONSERVATIVE. All of the coins I had put in rattle holders either became crack-outs for me, or I traded them for big premiums. Yet, a dealer friend I know, who buys coins at a wholesale basis at the shows for retail dealers and has made a living at it for almost 30 years, told me that even the “rattle holder” period had its grade-flation time.
A lot of people like to point to the “old green label” period when coins were conservatively or under graded. I noted it when I was dealer 15 or 20 years ago and used to hone in on those pieces. Yet, that are coins in rattle holders that would not get a straight grade today. I got burned on one of them when I bought an 1807 quarter in scratched holder and broke it out for a client who wanted only raw coins. I instantly find out that the coin had VF sharpness but had been polished and net graded. An unscrupulous person had scratched the holder to hide the problem. You learn from your mistakes if you are bright enough.
I think that grade-flation has been gradual. Despite my complaints about the current grading situation, there are still properly graded coins in new holders. There are just fewer of them. Part of the trouble is the crack-out game which seems to get easier if you can find properly graded coins in old holders give them a crack-out try.
All of this has been going on for years, and it will never end. The point I keep making is that you have to learn to protect yourself. No one else is going to do for you, unless they very honest, and they are a dealer who greatly values your business.
@REALGATOR asked: "Exactly what year did the "the good old days" of grading end? In other words, When did "gradeflation" start?"
IMO, "gradeflation" started Pre 1986 when Au's were being regularly sold as MS. While the two or three reputable grading services at the time tried to hold to a standard (that was different than the commercial market) they were not taken seriously by big time dealers. These are the folks who took over the job of grading coins for each other (the coin market) by commercial standards (strike, eye-appeal important) and started the two major TPGS close apart. Within a few years of 1986 and probably prior to 1990 - even their standards started to loosen.
IMO, the main reason gradflation took place was to reflect the rising coin values.
Even the "good old days" gave rise to concerns about whether coin grading was objective and consistent. After the coin market crash in 1990, there was a lot finger pointing. Allegations of grade inflation have been going since at least 1990.
http://articles.chicagotribune.com/1990-09-09/entertainment/9003150573_1_pcgs-professional-coin-grading-service-rare-coins
It has always been with us. It's a matter of how gradual, and regarding which grades and which series of coins, at a snapshot in time.
"Seu cabra da peste,
"Sou Mangueira......."
It's been around a while, that is for sure.
But I wonder how much is "gradeflation" as we currently define it, and how much is a combination of institutional "built-in inconsistency" ( that is, the lottery aspect of getting a supergrade to ensure repeat submissions and business for the TPGs) and the registry set "game."
When did the absolutely brilliant idea (from the TPGs point of view) of Registry sets begin?
There may lie the answer.
One of the first times I found a reference to 'grade inflation' was made by Otto Oddehon in Numismatic Scrapbook Magazine in September 1946 (Vol 12, No. 9, pages 945-948). He wrote The Specific Standard of Grading Coins on grade inflation and included the statement: What used to be very fine is now often graded as "extremely fine," or "about uncirculated."
I suspect grade inflation has been around for may years prior to Otto's article.
Edited to add citation.
See http://www.doubledimes.com for a free online reference for US twenty-cent pieces
In my opinion it has been around for many decades, but I agree with @mannie gray that the Registry has brought "gradeflation" to a whole other level just like it has with ball cards.
Donato
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The most perverse failures occurred in the late 1980s when "coin funds" were established based on sight-unseen "grading." There weren't enough high quality coins, so more were invented by inflating the stated condition.
Another round of falsehood and deception came with the promotion of on-line "graded" sets. By now, it means that an accurately graded AU coin is often found in a slab with a label stating "MS62" or some other falsehood.
Overall grade inflation is a greed-driven phenomenon - it will eventually collapse, much like other adulterated products, taking many deceived collectors with it.
Now I see why this question is difficult to pin down. It appears several events contributed to the "gradeflation" or moving standard. I collected coins as a kid in the late 1960s to mid-70s and then lost interest. Around 1980 when the silver price went bonkers I sold it all in college.
I never looked at a rare coin again until I discovered this thing called Ebay around 2000. By missing those 20+ years seems to cover my knowledge gap on this grading issue. Since I don't go to coin shows, this forum really helps. Thanks for the history lesson.
Since there are no 'standards', the issue of 'gradeflation' will continue.... Grades as we know them are opinions... true, they are opinions based on a general consensus of opinions - but that is not a standard. A true standard can be measured, has a definition and is repeatable. Real standards can be found here -
https://www.nist.gov/weights-and-measures/national-bureau-standards-publications-nbs
I worked in an industry that demanded REAL standards, and where one did not exist, (due to new products/technology) one would be created and agreed upon. Until the advent of computer grading, we will live with gradeflation - which is why the old adage 'Buy the coin, not the holder' was formed many years ago. Of course, coins are a major business, and as such, perhaps real standards are not welcome - either by dealers or the TPGs. Cheers, RickO
There is one standard, and that is what you can get for a coin when it's time to sell. Dealers and grading companies can talk all they want about how "fluid" grades are, but if the buyers don't come up with the cash because of preservative issues, all of their flowery talk does not mean anything.
I learned about grading and pricing in the numismatic school of hard knocks. I'd like to help collectors with the knowledge I have. Collectors should not expect to sell coins for the same price they paid immediately. A dealer has to make a living at his or her job just like you have to earn a wage or salary from your position. There are no guarantees that a collector will make money or get back what they paid in the long run. The only thing that collectors should strive for opportunities to buy their collectables at fair prices.
I know that “fair prices” is a lose term, but to me it means that a dealer should not be doubling their money on a sale unless they have held an item for a long time and the market has changed. To me a 20 to 30 percent mark-up is fair PLUS the sales tax if it applies. The mark-up will probably be lower for very expensive items.
Grading is one of the fundamentals to setting value and prices. Anyone who tells you different is lying through his or her teeth. Therefore there needs to be some standards, or this hobby, industry or whatever you want to call it will not survive.
We saw what could happen back in the 1980s when crooked “numismatic investment houses” bought AU and cleaned coins and sold them as “investment grade, Gem BU coins” for multiples of what they paid. It got the Federal Trade Commission down on this industry, and it gave all dealers a blackeye. That’s what PCGS and NGC got into the business, to combat that problem. The people who make their living in this industry don’t want to go back to those days.
I would argue that in some ways it is even more treacherous today because things are now done with a false veneer of legitimacy because of the grading services and putative guarantees. More and more of those AU, cleaned coins are now finding their way into straight graded holders under the facade of safety and protection by grading guarantees. Most collectors and dealers don't pay attention to the watering down of the guarantees that has happened in recent years. And even when guarantees appear to have teeth on paper, most don't realize that gradual grade inflation has all but voided older guarantees. "We guarantee this to be MS65." Under which scale (the current one or tomorrow's scale where everything moves up a point or two)?
Both services made promises of objective, consistent grading throughout time when started. If I recall correctly, I have seen both major services remark on how early holdered pieces were ultra conservatively graded and could upgrade today. These two statements/ideas are contradictory. The latter is double talk for the "standards" have obviously changed. That should give collectors and those who can't grade for themselves pause. CAC catches many mistakes, but it is not perfect, and I have seen far too many that I hated.
To me the "good old days" ended when we went from 4 grades of UNC to 11...….and then it went even crazier when + was added...…...then even crazier when CAC came along! So we have gone from 4 grades of UNC to 44!!
It was June 2, 1994 at about 5pm PST. I recall spilling mustard on my shirt whilst eating a hotdog and having an epiphany...
I have RAW coins that I bought over 50 years ago that the dealer graded by the old standard of AU/UNC/BU/Gem BU, and the few that I have submitted came back with an appropriate grade. To me, I think that this is evidence that coins were misrepresented by good dealers. But dealers in that day had their own grading scale.
TPG's have leveled the grading field, to an extent. But now coins are submitted many many times to get an incremental upgrade, which is now reflective of absolute value of the coin. So now the value of the coin is the value of the plastic in which is is encased. And we are all now competitive collectors instead of fellow collectors.
Gradeflation has limits, and it may even get worse. Perhaps all series will need to have a 70 example by which the others are graded. Hopefully grades do not become that relativistic market based view point. The TPG's do walk a fine line between their collector base and their dealer base.
OINK
When I could gtg and sometimes actually be right.
I started Eagle Eye Photo Seal in 1996 as a result of grading inflation. I think that is when the grading services began to loosen standards to the point where it hurt coin values. It may have been the year that the top tier graders were deemed too expensive to keep on the payroll.
Maybe the entire pyramid will collapse -- and we'll start another cycle?