The Inherent Flaw in Any Grading Service, Especially Over the Long Run

dragon

Consider the following scenario:

You have an 1881-S Morgan dollar with attractive toning that you just broke out of an older PCGS MS65 holder. You felt the coin was undergraded and bring it to the upcoming Long Beach show to get opinions from some very knowledgable and experienced dollar dealers that are experts in grading Morgan dollars. You show the coin (now raw) to the following 12 dealers to ask their objective opinion of grade:


Kevin Lipton
David Hall
Leon Hendrickson
Legend Numismatics
John Love
Larry Shepherd
Jim Halperin
Jonathan Kern
Julian Leidman
US Coins
Larry Goldberg
Dave Bowers

After getting all 12 objective opinions, you are given the following grades (in no specific order):

(3) solid MS65, shot 66
(2) solid MS66
(4) a weak MS66
(1) solid MS64, shot 65
(1) strong MS66, shot 67
(1) weak MS65 with questionable toning

And if you showed these same very talented and experienced dealers the same coin 8-12 months later, you would most likely get a whole new and different set of opinions from at least a few of them.

So what is my point? The point is (using PCGS or NGC as my example), that the top grading services have employed many, many different graders over the past 15 years, and they all have their own personal grading standards, likes and dislikes, and various other criteria for how they would grade any coin. -----Yet the top services continually INSIST that their standards do not change and are graded by their companies standards which do not change.------

In light of the above, this is not only unlikely but virtually impossible IMO. There is no way for any grading service to remain consistent over any period of time unless the same people have been grading for them since their very inception, and even then it would be difficult. And I believe it is common knowledge that this has not been even remotely the case with any of the top services.

I have heard some people say that grading is static and standards have "evolved" or "adjusted to pricing" over the past 10-15 years, I do not think this is true, a nice MS65 coin was the same in 1987, 1993, 1997, and now in 2002. Markets (since 1986) don't change grading standards IMO, people just accept that no service can possibly remain consistent over time and make excuses to justify that fact. And the longer the time frame, the more inconsistent they become and will continue to be. This also explains in part why there is a new 2-tiered market and why spreads are widening, but that's a whole other subject.

Any opinions?

Dragon

dorkkarl

i think your unbelievably right on , dragon. it underscores the single most important & overlooked factor in the whole certification thing, which is that grading is an art, not a science, and is therefore by definition SUBJECTIVE, and also by definition will vary from person to person, and from time to time. when i hear someone talking about a pcgs grade, etc, they ALWAYS discuss the coin as if the grade were an absolute number. but it's a ridiculous attitude to take.

absolute numbers are such thing as: what is your age? how many feet in a mile? what is your annual salary? what is the standard weight of a double eagle, etc. but it is totally impossible to answer the question "what does this coin grade" with a 100%, completely absolute number.

also, what people who are stuck on plastic just DO NOT understand, is that the varying of opinions is a crucial part of what makes this hobby fun. if everyone walked around with exactly the same opinoin on all coins, we'd have nothing to talk about! yet these people hope, and expect, and even DEMAND just that. they would rather pay good money for somebody else to have an opinion, and actualy consider that "other" opinion more important than their own!

the ironic thing is that , i have been there before. i went through that stage where the plastic opinion was more important than my own (to me). all i can say to those kinds of collectors is that my enjoyment went up ten-fold when i took full responsibility for grading my own coins. the same could happen for anyone.

dude, extremely valuable thread that will probably not get the attention it deserves. good job!

K S

wallstreetman

In your case, what difference does it make, you will keep submitting until it gets overgraded!

agentjim007

PCGS has a grading set that is supposed to keep them consistant

braddick

Dragon, although I appreciate your scenerio, I don't believe you'de get that diverse and array of opinions on that one 1881-S Morgan from those professionals. Would some state it's a strong MS64+ while one or two (with all the others stating MS65) stating it was a shot 66? Sure. But the range is smaller, in my opinion, than you laid out.
Other than that, your fundamental argument is solid- No grade on any coin is a lock.

It never will be, nor should it be.
If so you'de be leaning more toward science which Numismatics is not.

darktone

Dragon- I agree. I have sent the same coin to be graded three times and have it come back three different grades. I just cracked out three coins from old ANA slabs sent them to NGC and one that was graded ms60 brown is now a 63 RB and two others moved from 65 to 66. And if I submitted these coins again I would not be surprised to get different grades and that is just the way it works.

wallstreetman-I take it you and Dragon must have had a bad experience for a remark like that but if anyone thinks a coin will up-grade I think they have the right to send it in for regrading( collectors and dealers). A collector should always use the grade on a slab as a guide afterall it is just someones opinion especially on a coin where there is a big price difference between one grade point because coin grading is not an exact science.
mike

Petescorner

I agree with what you're saying Dragon. I still buy slabs, but I now lean towards lower MS grades where one subjective hiccup doesn't make a ten-fold difference in the price of the coin. My MS-63 coin may be overgraded, but in most cases, it's only worth slightly less if were an actual 62. The price differences between 65&66 and 66&67 in the series that I collect (Buffalo Nickels) got to be too much for me to feel comfortable with, relying solely on what we know are subjective opinions.

Also, I've had a lot of fun searching for slabbed common date Buffaloes in lower MS grades. Ever try to find a 1938-D Buff slabbed in MS-63? Kind of like a Braddick-type search!

keets

the reason we call it the "crackout game" is because that's what it is, a game........

the typical example is that the collector wants a higher grade for a coin so it's resubmitted till the desired grade is received. there is a certain scientific application which could be used and it would more than likely put an end to all these types of threads---it's called the law of averages. pick out that typical common date 1881-S morgan with the attractive toning and send it back in, oh, say 100 times. and make sure you do it under the one day service cracked out and sent back in immediately upon return. that way you'll be getting it graded by the same people in a very short time frame and you'll have some reliable data to base an objective opinion on. otherwise you're just guessing like the experts you would choose to examine the coin in long beach.

an objective opinion is always better and more reliable than a biased opinion, that's much of the reason why the services use the third party approach. the major flaw in your example that i observe is that the dealers you would show the coin to at the show most likely would know you and part of their opinion of the coin would be their opinion of you-----bias.

when was the last time you submitted a coin that you KNEW was OVERGRADED? the game works both ways. please do your above example with a coin you feel strongly is overgraded and come to us with the results. i believe they would be interesting. hey, i did it and it livened things up for a while around here!!!

al h.

cladking

But the market standards do change and evolve over time. And the coins are
graded to the market. Strike, toning, surfaces etc are always coming into and
going out of style as the market participants and their tastes change. This means
evolving prices which is evolving grades.

keets

which translates into bias.........

al h.

tradedollarnut

The bears on running on Wall Street. Too bad Bear won't run over WSM. I'd state that his response was idiotic and sophomoric, but he already knows that.

CarlWohlforth

It makes sense. I have no doubt that training would be involved in being a grader. I'm certain PCGS would want their graders to know what their standards are. But no matter, you can't totally remove the subjective element.

You present an interesting example. It sounds like the coin really is a boarderline 66. Did you make that up as an interesting hypothetical or did it really happen like that? It is those pesky boarderline coins that cause so much grading discussion!

DHeath

Dragon,

Yes, grading is subjective as demonstrated by your example and the dealer opinions. You mentioned 12 grades. As a fun exercise, I assigned the 65's a 5, the 65 maybe 66's a 5.5, the 64 maybe 65's a 4.5, and the weak 65 a 4.5. If you average those grades, you end up with MS 65.66. PCGS said MS65 with a grade guarantee. It is so close that I'm sure it could be argued either way, and that's a fun coin.

Petescorner

One more thing since Don mentioned averaging. I believe many third party grading services have the coin looked at by more than one grader to determine a "consenus" opinion. That would minimize the "personal" standards, which would seem to cause the most inconsistency. But overall, I still agree with what was initially posted.

Gilbert

Dragon

Do you really feel that way, or are you presenting a subject for discussion?

I don't believe a MS65 in 1987 would be the same as 1993 & 1997. At that time (the establishment of the independent grading services, give or take a year or two) the Sheldon scale as applied today was relatively new (use of MS61, 62, 64, 66 etc.) Generally, coins were pretty much still adjectivally described by the masses (MS60 - BU, MS63 - Choice BU, MS65 GEM, MS67 Superb), and the "tweener grades" were still being established, for lack of a better analogy.

Now, the services stating that the standards don't change, I believe is a matter of semantics. On the one hand, they are following the published standards, either PCGS or ANA, but there still exists the "out" - market consideration; the dreaded (IMO) market grading. So, when inventory dries up OR becomes saturated, grading is adjusted accordingly (when coins are scarce then they become more lenient to make a market - all those true MS65 are placed, so the better 64s move into that slot; when inventory is prevalent then standards tighten - the market has more options and is more picky - those "substitute 65s won't fly anymore, so they get knocked back down). This is why I am opposed to market grading.

As long as folks continue the crackout game, it remains profitable to the grading services to vary the grades ever so slightly. Imagine, if a coin was slabbed at its "techincal grade" and remained the assigned grade, eventually the services would "slab" themselves right out of service, with the exception of the "modern market," which obviously isn't sufficently sustaining them - just look at the various gimmicks being employed to keep the coins coming (autographs, flags, pedigrees, designations, etc.)

Just look at what has happened since the SQ program begin and created a large influx of new collectors; just about everything got a promotion (63s became 64s, 64s became 65s, the prices for 65s miraculously came down - really 64s anyway so no one is losing)

Of course, rarities remain as such, but even some of their grades bumped up, and the most activity takes place on the common (prevalent) coins, but, I think you can follow my drift.

Market grading = assignment of value, and permits MORE subjectivity than could be reasonably expected and accepted if coins were merely graded based on their state of preservation as defined in the published a measurable standard(s).

Whew! Hopefully that makes sense.

lordmarcovan

Well spoken, as usual.

Rather than blather on with my longwinded "wisdom" on the topic, I'll shut up and read, for once...

gemseeker

In my opinion, the slab is only as good as the person who graded it and not the company as a whole. Shifting personnel will eventually result in variances in grading results. Therefore you have to time your submissions when an appropriate person is employed at a given time.

IrishMike

Would some one show me where the grading companies have publicly said that their standards don't change. I have seen comments from graders that they have meetings occasionally to discuss whether they are applying standards correctly, if fact I think the word standard should be stricken from nusmismatics altogether. There is contrary to some opinions expressed here, no one standard. Coin grading evolves over time like a lot of other things in life.

Nic

I agree with most of whats been said already. However, do certain grades just disappear when grading standards tighten? Such as MS 68 for earlier type, etc. If older graded coins were cracked and resubmitted raw the risk would extreme. Has PCGS already seen all coins worthy of these grades? I asked Rick this same ? in the Q/A forum. K

its4real

now THIS is good stuff!

Thanks guys.

birddog

This whole MS thing was started by the graders just to make money and boy they have done that. Back years ago a coin was UNC. PERIOD. Then it was up to the buyer to decide just how UNC. it was, and how nice of an UNC. coin it was. We have all been led into the trap of the MS game, and the buyers are buying the plastic and not the coin because they are mostly blind to grading. True or not .... any of us can offer a nice graded MS65 and sell it quicker and for more money than an absolutely perfect raw UNC. coin.

IMHO

bd

griffin6

Some realities about coin grading...

Since the advent of certified (and particularly encapsulated) grading, the standards can ONLY get looser over time. This is inevitable because:

1. Grading is subjective and even with a consensus system, there are mistakes.
2. The undergrading mistakes are inevitably recognized by someone and cracked out for resubmission.
3. The overgrading mistakes become the new low standard on which sight unseen bids are formulated.
4. In time, the market acclimates to the new low standard and accepts it as a trading reality. This impacts all of the coins of superior quality (in the grade) as well.
5. The "crack out artists" are constantly resubmitting the high end material for grades with a price spread, and in doing so, keep pushing the envelope and the standard lines.

This creates a fluid market and lon term collectors, consumers or accumulators can protect themselves best by avoiding buying coins with grades that are on the top end of a big spread. Buy NICE coins from the lower grade and if/when disposing of them at a later date, either get a current grading consensus or sell at auction... the coin may very well have gone up or at least bring premium spread money.