SMQ Understates Market for High Grades?

wmerlin

The Harmers Auction this past week and Goldberg Sale earlier this Spring certainly indicate that the market for Graded Stamps 90 and higher is stronger than the SMQ book.

For ungraded stamps in auctions, like Siegel this week, I do not know if that is true. I think the reason is that with an "actual" vs. an "estimated" grade, the market will pay a premium above SMQ for the actual.

Does anybody know how PSE actually determines the price/market? Are they guessing what the grade is by eyeballing the stamps from an Auction catalogue or are they asking their customers how much they paid for their graded stamps at auction. My hunch is that PSE is guessing/eyeballing the grade and comparing the price realized to the guessed at grade. If that is true, it begs the question if there are two markets--- graded vs. ungraded.

Nevertheless, for most graded NH 95's or 98's, the SMQ needs about a 25% to 33% increase across the board. Heck, Steve Crippe, a dealer who has to mark up from his purchase price is buying at the SMQ market for 95's and up.

There is interest in the high end Stamp Market. Any thoughts?

Chip Merlin

dougwtx

I think the SMQ gets their values from auctions, dealers, and the such; like the Greysheet, Bluesheet, and Greensheet get their values as well as any other price guide in stamps or coins. The Scott Valuation Supplement is very similar. IMO, I hope the stamp market does not go where coins have gone with grading. Currency is following coins now, but we will see if that is a fad or will continue to stay. All of this grading stuff is driven by buyers. Some are willing to pay multiples for a high grade and thats fine. If its ungraded, then its up to the buyer and seller to haggle over if its a XF-S 95 or a SUP 98. Just my thoughts.

Doug

DJC

I'm active in both US stamp (classics) and coins, and I'm dreading the prospect of the stamp market being overrun by the coin grading services methodology. Certification has (and always will) a place in philately because of issues of authenticity, and I don't even mind a grading opinion being rendered by the same experts. BUt some of the premiums for 90+ are starting to resemble the spreads on mint state US coin.

For those who don't know, a MS64 Morgan Silver dollar can go from $50 in MS63, to $500 in MS64, to $5000 in MS65, and even more insane the higher you go. The MS scale runs from MS60 to 70, and yes there is a noticeable difference in quality between a 60 and a 64, or a 63 and a 66. But they're all still mint coins. Plus, the spreads are based in large part on the market confidence of the 'slabbing' service. PCGS generally commands the highest, followed pretty closely by NGC. ANACS is held as the better 2nd tier service, with ICG sometimes making that list. Most others are severly discounted by the market, if they're even trusted at all. I've seen many blatantly EF to AU coins (light but definite wear from circulation) being touted as MS63 (attractive uncirculated) or higher by some of the third world slabbing services. Further, if you break it out of the slab to store in an album, all bets are off, as the coin is now 'raw', which has a whole 'nother level of problems.

But back to stamps, while the market will determine the premium to be paid for ultra high grade issues, the guides still have a long way to go. I use my quarterly very heavily, but it's still very flawed. Most classics (19th century) seem to sell far beyond the quarterly's pricing for 90+ grades. Even the later items are way off, in some cases.

I'm working on a 'as close to superb as I can afford' set of the 1922-25 Series and it's varieties. If you can find a superb MNH 1/2c Nathan Hale (551) it's usually priced at $20-$40 with a PSE. Quarterly has it at $10. However, I picked mine from a 'face value' box in Lauderdale a few months back for $0.25. Granted, I haven't had it graded, but it's equal to any 95 or 98 I've ever seen. Which is it, a quarter or forty bucks?

I think the 'two market' and 'insane premium' game is just heating up in the stamp market. While I don't like it, I've seen what happened in the coin market, and am prepared to take advantage of this new mode. Maybe it won't be so bad....

wmerlin

I have heard many concerns about the speculation and "investment" aspect of coins driving those markets rediculously insane. There appears to be a very, very active speculative coin market at the retail and wholesale level. There seems to be enough graded coins that there is enough data collected to know what the market is for coins graded at various points by various organizations. But, I do not collect coins.

I use the SMQ heavily when bidding at auction as well. But, there are not that many "graded" stamps. Even in your example, you are "guessing" at the grade of the 551. Still, what a great example: SMQ Lists a 90 at $1, 95 at $10, and 98 at $30. Fair enough. But, just to get it graded, it costs a min of $15. So, just to have a "graded" 90, you would be into an investment of $15.25. I bet most of us would bid/pay a premium over the SMQ for such a low priced but graded stamp just b/c we do not have to incur the hassle, time, cost and possible risk of having less than a 90 grade. Thus, while the ungraded market may be $.25 as you found it, the graded market is far different.

For more expensive/rare stamps, the same is true except the "risk" of being wrong about the grade of a stamp b/c we are eyeballing/guessing at the grade, can be very expensive. How many of us study centering from the picture of a stamp and then are trying to figure if we can trust the description in an auction catalog?--- how much we can really trust these auctioneers is another topic ripe for discussion. The "graded" stamp takes out this risk of making a bad decision. The difference b/w a "J" grade for the more expensive stamps highlights how much the market can change on very subtle differences which are hard to detect w/o carefully inspecting the stamp.

What I do not understand and wish Dr. Bill would explain is: Does PSE you really have a statistical database for the prices or are you guys just estimating what the market is? Maybe someone from PSE is monitoring this board and will give us the real scoop.

Hopefully, the market is not going to explode higher and higher for awhile--- I have a bunch of stamps I need to collect first!

DJC

True enough, wmerlin.

IMO, the stamp market is in the beginning stages of what the coin market started into on '86-'89. As grading took hold, competetion for higher graded material really heated up. Many people made fortunes submitting material, getting higher grades, and selling into the new 2-level market for the now higher 'graded premium'. However, as it became more obvious that certain items (common date Morgan, Walkers, and Saints, etc) populations were exploding in high grades, and they were not as rare as thought before, the whole market fell apart.

Obviously there were many other factors, but the retreat of the high grade generic graded speculator money triggered the fall. When the commons crashed, they took the whole market, even truly rare pieces, with it. Over time, the truly rare pieces have recovered and gained vastly more ground, as almost 20 years of grading has proven their scarcity. But many common, generic items still haven't recovered their '89-'90 highs (MS65 common Morgans were $500, now $150).

Truly scarce, premium quality collectibles with a well developed collector base will almost always hold their value in the very long run. But these current speculator and investor cycles, grading fluctuations and the overall "faddish" nature of most hobby markets make for a very interesting ride.