Subjective Nature of Grading allows for "Market Grading"
storm888
Posts: 11,701 ✭✭✭
In my view, every TPG, in every field of collecting, has now adopted the principles of
"market grading." This practice allows for the expansion of the collector-base and
encourages novice collectors to remain active and aspire to own "finer examples"
within their collecting disciplines.
For many years, "arbitrage between TPGs" and "simple crack and resub" has been
a predominate factor within the coin investment community. The currency and stamp
industries are in the mid-phase of the phenomenon, and trading cards are catching
up quickly.
"Market grading" first occurs as a natural force of supply and demand at the very high
end of collectible markets. When prices/values of the "finest examples" in a given
market begin to "exclude" a majority of current and potential market-participants,
there is a natural and irresistible market force that dictates an increase in the
supply of product that can be compared in "quality and desirability" to examples
that have already been deemed "the finest," and have already been priced out of
the reach of mid-level collectors.
Once the process of assigning numerical TPG-determined grades to collectibles begins
and is accepted in the marketplace, there is no turning back. Because the production
of such collectibles "has ceased," and there is no possibility of a "natural" increase in
supply, the market has no choice but to adopt "grading principles" that accommodate
its existence, its growth and its prosperity. ALL TPGs, ultimately, follow the demands
of the markets they serve.
Because TPG grading standards ALL contain elements that dictate/allow "subjectivity,"
those standards are ideally suited to become responsibly fungible as the move to
"market grading" gets underway.
As an example of "fungible," we can look at the PSA grading standards for a PSA 10
and a PSA 9:
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A PSA Gem Mint 10 card is a virtually perfect card. Attributes include four perfectly sharp corners, sharp focus and full original gloss. A PSA Gem Mint 10 card must be free of staining of any kind, but an allowance may be made for a slight printing imperfection, if it doesn't impair the overall appeal of the card. The image must be centered on the card within a tolerance not to exceed approximately 55/45 to 60/40 percent on the front, and 75/25 percent on the reverse.
A PSA Mint 9 is a superb condition card that exhibits only one of the following minor flaws: a very slight wax stain on reverse, a minor printing imperfection or slightly off-white borders. Centering must be approximately 60/40 to 65/35 or better on the front and 90/10 or better on the reverse.
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When we insert the "subjectivity factor" into the equation, we can easily see that, as
market forces demand changes in supply, these grading standards are ideally suited
to accommodate those demands.
It is MOST important to note that "market grading" does NOT mean a "lowering" of the
grading standards that TPGs employ. The standards are simply melded into the "demands.
decisions and expectations" of the collector marketplace. NO TPG can lead a marketplace
in a direction that limited-supplies will not allow that marketplace to go. To see "market
grading" as a weakening of standards is to not understand its necessity in the growth
and survival of the collectibles market.
Because most experts and dealers have determined that ONLY an increased supply of
very high-end collectibles will allow their industries to thrive, TPGs have little choice but
to "adapt" their standards to those that are "being accepted" within a given collectible
field. TPGs that might resist the forces that "cause" market-grading, would likely become
"museum niche players," and would certainly not be able to serve the "collecting proletariat."
So. What does all that blahblahblah mean to "card collectors?"
A few things. None of them terrible.
In the short-term, there will be many more "high-grade"cards flowing into the market.
At first, prices will be higher than they have been in the past, but the increase in supply,
over-time, will adjust those prices downward and collectors will be able to own the
"market-accepted versions" of cards that "are among" or "comparable to" the finest known
at prices that can/should remain constant in future years.
The "new economy" that will be introduced into the market will induce MANY more people
into the card collecting market. This will be good for long-matriculated collectors who are
desirous of liquidating portions of their collections at a profit; much of those profits will be
reabsorbed by the "upper levels" of the market as "upgrading" becomes more accessible
to a broader demographic.
Also, there will be short to medium term opportunities for collectors and investors to "resubmit"
previously graded cards that were TPGd under a "different market assumption;" Extreme
profit potential likely exists for collectors who adopt this practice early in the "transition period."
Collectors who can document that their "super-highly graded" cards were TPGd "pre-adoption"
of market grading, may, in the short term, be able to sell their 10s for a substantial premium
above market, but the real "value added" will probably be realized by the long-term holders
of 9s. (Do NOT look for "market grading" to substantially affect your 8s; the real shift will
be in your 9s, where "subjectivity" can be most fairly and meaningfully applied within existing
grading standards.)
In summary: Market-Grading is not something to be feared. It has certainly "changed" every
collectible field it has been employed in, but it has not "destroyed" any of them; in fact, many
folks argue it has allowed them to expand almost exponentially. Again, it is critical to remember
that market-grading is not about lax, liberal or reduced standards; it is simply a matter of
allowing an appropriate amount of subjectivity within TPG's stringent standards to achieve
a result that the marketplace has made clear it is demanding. And, the egalitarian nature of
such shifts allow even the most "financially modest" collectors to participate in the short-term
rewards and the long-term pleasures of owning high-grade treasures.
storm
Folks Who Bite Get Bitten. Folks Who Don't Bite Get Eaten.
0
Comments
I think you're a very smart guy, and I really enjoy reading your posts. But please, PLEASE quit putting common phrases in quotation marks.
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I will make a good faith effort to substantially comply with your request.
storm
<< <i>So. What does all that blahblahblah mean to "card collectors?" >>
I doubt very much that a material new supply will be found of vintage cards!! There may be a increase in the number of graded 1982 Topps Ropken Rookies, but not 1954 Topps Gordie Howe or 1952 Mantles!!!!! The old high quality valuable vintage cards have been out of the shoeboxes for a long time !!!
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Totally correct.
That segment of the card market neither needs nor wants
a change that could diminish the dollar vals of previously
slabbed vintage rare-stuff.
That does not mean that we may not see some very high-end
6s find their way into 7 holders issued by the same TPGs.
The subjectivity/similarity of the 10/9 standards is where the
wide-gate is located. That certainly will have little/no effect on
vintage stuff, for now at least.
storm
At first, prices will be higher than they have been in the past, but the increase in supply,
over-time, will adjust those prices downward and collectors will be able to own the
"market-accepted versions" of cards that "are among" or "comparable to" the finest known
at prices that can/should remain constant in future years."
Really? And what proof do you have that supply will increase? There are no reliable tracking systems of high grade cards. Sure, we can compare the number of PSA 9's from this year to say 5 years ago, but how much of that is cross over or resubmission? And who is to say that we haven't reached the peak the number of high graded cards in certain or most sets? And i assume you are referring to post war cards and not pre war, where it's becoming more and more established that high grade examples are tougher to find.
There are no reliable tracking systems of high grade cards. Sure,
we can compare the number of PSA 9's from this year to say 5 years ago,
but how much of that is cross over or resubmission?"
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Supply has to increase. That is the ostensible purpose of the shift
to market grading. (Some will claim that the real purpose is to make
more dealers more rich, but an increase in high-grades can only
lead to retracing prices.) POP reports are likely to be rendered more
useless as time passes; they are already quite tainted by "crackers,"
who do not turn in their flips. As the POP of 10s increases there is
little chance that the listed POPs of 9s will remain accurate. We will
really only be able to gauge the accuracy of my major assumptions
when/if we see more and more 10s appearing and their retail prices
retreating. We will know the source of those tens, because we now
have a pretty good idea that there are not TONS of scarce ungraded
cards in monster hidden stashes; the new 10s will come from existing
9 POPS, under market grading principles.
Also, dealers will have little incentive to do anything other than to
fairly rapidly introduce the new supply of high-grade stuff into the
market. Most of them do not have a two-decade view of what is
going on; they want to profit from the new high-val items that market
grading will produce. Hoarding of the new product would lead to
financial losses as other dealers begin to unload more rapidly. (I
am not saying that they will flood the market, ONLY that they will
not slowly feed the market as the diamond cartel does. There is
no card "cartel," and the rules of the wild west will probably
determine the quantities that appear.)
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"And who is to say that we haven't reached the peak the number of high
graded cards in certain or most sets? And i assume you are referring to
post war cards and not pre war, where it's becoming more and more
established that high grade examples are tougher to find."
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Using conventional grading schemes, we certainly have reached the peak
you describe. Market grading is the only way to substantially increase that
supply. Pre-war stuff is not ideally suited to participate in the grading shifts.
Some mid-grade stuff might get some bumps, but because the "grading
standards" are not being abandoned/changed, lower grade vintage cannot
benefit much. From 8 backwards to 1, the range of most expensive vintage
items, there is simply no/little flexibility in the grading standards; subjectivity
is not a major player. The nice spread is primarily going to be seen between
9 and 10 because of the way the standards are constructed. (The words
themselves are VERY flexible in the 9 and 10 standards, but NOT so flexible
at all as we look down the number scale.)
Again, none of my views on market grading are meant to stir controversy.
I am just seeing what is happening, forming opinions, and tossing them
out there for folks to consider. Further, if what I am saying has any merit,
the notion that there is any favoritism among TPGs is clearly proven to be
totally false.
storm
With all due respect - you just took a hobby which is supposed to be fun.
And turned it into something that looks awfully like work.
If somehow this is what coin and stamp people do?
I'ld rather collect rocks off the beach that have been polished by surf and time.
mike
<< <i>In my view, every TPG, in every field of collecting, has now adopted the principles of
"market grading." This practice allows for the expansion of the collector-base and
encourages novice collectors to remain active and aspire to own "finer examples"
within their collecting disciplines. >>
I fear in our case, the increase in 10's has had absolutely nothing to do with any noble or natural event to expand the collector base and encourage novice collectors. An analogy to your comment is similar to what Alan Greenspan did in the past to control money supply. Our hobby is anything but this sophisticated. Much more likely, the Gem Mint grade has decidedly become more prevelent due to the greed of public companies. They have simply manipulated a way, within the subjective limitations of grading standards, to give more 10's, which without, many modern cards would simply not be submitted. This unnatural evolution has statistical evidence. BGS 9.5's-10's and PSA 10's appear at a much higher percentage rate then they did 3-4 years ago. The thought that collectors have somehow discovered an "improved eye" for selecting 10's is terribly naive in my opinion.
<< <i>"Market grading" first occurs as a natural force of supply and demand at the very high
end of collectible markets. When prices/values of the "finest examples" in a given
market begin to "exclude" a majority of current and potential market-participants,
there is a natural and irresistible market force that dictates an increase in the
supply of product that can be compared in "quality and desirability" to examples
that have already been deemed "the finest," and have already been priced out of
the reach of mid-level collectors. >>
There are probably less than 50 card collectors in the world that truly deal with the superlative examples of our hobby. It is a thinly traded industry, significant less than stamps and certainly coins. These examples will always exclude the majority and hence have no impact on the general collecting community.
<< <i>Once the process of assigning numerical TPG-determined grades to collectibles begins
and is accepted in the marketplace, there is no turning back. Because the production
of such collectibles "has ceased," and there is no possibility of a "natural" increase in
supply, the market has no choice but to adopt "grading principles" that accommodate
its existence, its growth and its prosperity. ALL TPGs, ultimately, follow the demands
of the markets they serve. >>
Public companies spend a significant amount of time investigating new avenues of revenue. You are correct in that a certain amount of revenue each year is forecasted for individuals resubmitting cards for potential bumps. To say that an allowable subjective grade movement over the years based on current "grading principals" is a requirement for growth and prosperity in the hobby is absurd. The only people that benefit from this is public companies. The significant majority of collectors purchase mid-grade material, which is relatively abundant and free from elitism or demand for the "finest example."
<< <i>When we insert the "subjectivity factor" into the equation, we can easily see that, as
market forces demand changes in supply, these grading standards are ideally suited
to accommodate those demands. >>
I completely agree with your that BGS and PSA have released a significant amount more of Gem Mint cards than in the past. Again, this had absolutely nothing to do with some unquenchable demand or market force. It was simply a way to drive collectors for a reason to submit modern cards.
<< <i>It is MOST important to note that "market grading" does NOT mean a "lowering" of the
grading standards that TPGs employ. The standards are simply melded into the "demands.
decisions and expectations" of the collector marketplace. NO TPG can lead a marketplace
in a direction that limited-supplies will not allow that marketplace to go. To see "market
grading" as a weakening of standards is to not understand its necessity in the growth
and survival of the collectibles market. >>
Allowing more 10's to pass through the grading doors has nothing to do with the growth and survival of the collectibles market. Dealers would have reduced their submissions if graded 10's did not become more prevelent. This was of great concern to public companies. The hobby was actually healthier before professional grading came into play. To say it is a necessity for growth and survival is simply fraudulent.
<< <i>Also, the marketplace did not demand more 10's.
Because most experts and dealers have determined that ONLY an increased supply of
very high-end collectibles will allow their industries to thrive, TPGs have little choice but
to "adapt" their standards to those that are "being accepted" within a given collectible
field. TPGs that might resist the forces that "cause" market-grading, would likely become
"museum niche players," and would certainly not be able to serve the "collecting proletariat." >>
You are absolutely correct, the marketplace did not demand more 10's. Dealers and experts, however, did NOT determine that an increase in 10's was required for the industry to survive. Public companies realized that they needed to give more 10's to keep dealers submitting modern cards.
I also totally agree with your point that the smart thing to do is sell all 10's very quickly, as they will most certainly come down in price. There is also a chance for individuals with a good eye to crack out high end 9's and resubmit for 10's and then again sell very quickly.