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Market Swings and Grading Swings
CalGold
Posts: 2,608 ✭✭
Russ’s thread lamenting about not getting CAM designations led some posters to proffer theories that tie market price trends to trends in tighter or looser grading.
One line of thinking is that as prices rise, grading tightens. The other theory is that the opposite is true and that as market price trend down grading tightens.
Of course these theories may all lack basis in reality. In theory the graders grade based on technical coin factors that have nothing to do with prices. In theory they neither know nor care what the price trend of a coin is. All “historical” evidence is mere coincidence or merely the imagination of some dealers and collectors.
Personally, I tend to think that Laura Sperber’s statements from another thread is probably correct:
<< <i> “It happens especially if they get "spooked" by a string of bad coins coming through (can't blame them). You also have the scenerio where the grading teams change which means a different set of eyes/standards to a slight degree.” “If any grading service see a number of cleaned/no grade coins come thru raw, they tighten up to try to make sure none slip through and end up in slabs” >>
What do you think?
I offer the following for what little it may be worth.
As prices rise, collectors become more picky, not less picky. It is human nature to be more picky when buying an expensive item than when buying something cheap. So they may perceive that TPG grading has loosened but in reality only their own grading has tightened.
As prices rise, there is more incentive to play the crack out game so eventually more PQ coins eventually migrate into higher grade holders. That means there are more low end, liner, coins in high grade holders and buyers perceive that grading has loosened and more talk about gradeflation.
As prices rise, collectors may have to settle for lower graded coins (due to budget limits and the better coins having been scarfed up). When you are looking at coins at a lower grade than preferred they don’t look as good as the ones in the higher grade that you are used to buying.
As prices rise, there is more incentive for people to try to get cleaned and other problem coins holdered. See Laura’s comment above.
That having been said, I can see reasons why market factors could “in theory” impact grading IF a TPG allowed its business interest to impact grading.
As prices rise, the cost and risk of settling claims for over-grading goes up. One would assume that would precipitate tighter grading, not looser. Conversely, as prices decline, the cost/risk of over-grade claims falls which one would think could result in graders going easier on liners.
Also when prices rise for top pops, submissions of fresh coins goes up. As pops rise prices fall. At a certain point submissions dry up. Eg. MS 67 price $20; MS 68 price $500. As more coins are made at MS68 and the price falls, submissions fall. So IF a TPG were influenced by market prices in its grading it would have an incentive to tighten on those kinds of coins to keep submissions coming. That of course assumes that they don’t just grade a first MS69 and start the ball rolling again.
CG
One line of thinking is that as prices rise, grading tightens. The other theory is that the opposite is true and that as market price trend down grading tightens.
Of course these theories may all lack basis in reality. In theory the graders grade based on technical coin factors that have nothing to do with prices. In theory they neither know nor care what the price trend of a coin is. All “historical” evidence is mere coincidence or merely the imagination of some dealers and collectors.
Personally, I tend to think that Laura Sperber’s statements from another thread is probably correct:
<< <i> “It happens especially if they get "spooked" by a string of bad coins coming through (can't blame them). You also have the scenerio where the grading teams change which means a different set of eyes/standards to a slight degree.” “If any grading service see a number of cleaned/no grade coins come thru raw, they tighten up to try to make sure none slip through and end up in slabs” >>
What do you think?
I offer the following for what little it may be worth.
As prices rise, collectors become more picky, not less picky. It is human nature to be more picky when buying an expensive item than when buying something cheap. So they may perceive that TPG grading has loosened but in reality only their own grading has tightened.
As prices rise, there is more incentive to play the crack out game so eventually more PQ coins eventually migrate into higher grade holders. That means there are more low end, liner, coins in high grade holders and buyers perceive that grading has loosened and more talk about gradeflation.
As prices rise, collectors may have to settle for lower graded coins (due to budget limits and the better coins having been scarfed up). When you are looking at coins at a lower grade than preferred they don’t look as good as the ones in the higher grade that you are used to buying.
As prices rise, there is more incentive for people to try to get cleaned and other problem coins holdered. See Laura’s comment above.
That having been said, I can see reasons why market factors could “in theory” impact grading IF a TPG allowed its business interest to impact grading.
As prices rise, the cost and risk of settling claims for over-grading goes up. One would assume that would precipitate tighter grading, not looser. Conversely, as prices decline, the cost/risk of over-grade claims falls which one would think could result in graders going easier on liners.
Also when prices rise for top pops, submissions of fresh coins goes up. As pops rise prices fall. At a certain point submissions dry up. Eg. MS 67 price $20; MS 68 price $500. As more coins are made at MS68 and the price falls, submissions fall. So IF a TPG were influenced by market prices in its grading it would have an incentive to tighten on those kinds of coins to keep submissions coming. That of course assumes that they don’t just grade a first MS69 and start the ball rolling again.
CG
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Comments
<< <i>...in theory they neither know nor care what the price trend of a coin is... >>
In reality they are quite well aware of the value or pop of the coin. I believe HRH said himself especially rare or expensive coins go through a double verification or something. I wonder what % of coins the grade gets changed? I wonder if that same % of coins that didn't get double verified, would change if they had gotten double verified.