Is Gradeflation Healthy for the Hobby?

GoldenEyeNumismatics

I can't really see any way that it is unhealthy. Essentially it's has only resulted in some people making a good deal of money, but I don't think it's lost many people much.

It's obvious that the coins themselves don't change, only the grades do. But these grades often result in big $$ differences. As long as we are experiencing grade inflation, rather than deflation, I see no way that it can really hurt anyone at the present.

mrpotatoheadd

<< <i>As long as we are experiencing grade inflation, rather than deflation, I see no way that it can really hurt anyone. >>

Lots of people bought into that concept with regards to real estate values, too. I believe it's not working out well for all of them. Nothing lasts forever.

RedTiger

Modest grade inflation has helped dealers and the grading companies. I believe grade inflation is a natural consequence of the grading service business model.

Rampant grade inflation would make certified grading useless. Are third world slabbers and self-slabbers good for the hobby? That is where grade inflation has its silly season.

TwoSides2aCoin

I don't think anything is healthy for this hobby. Even YNs get old after a while.

keets

i might agree with your premise if things stayed on some kind of a continuing curve, but what tends to happen IMHO is that coins get overgraded and then the brakes are applied and things go in the reverse direction. then the cycle starts over again. collectors/dealers caught at the wrong point in the cycle who can't wait things out or who mistakenly sell an undergraded coin or buy an overgraded coin certainly lose.

MidLifeCrisis

<< <i>As long as we are experiencing grade inflation, rather than deflation, I see no way that it can really hurt anyone at the present. >>


That's just it...the pendulum swings both ways...even now when coins are slabbed at a certain grade by PCGS or NGC, dealers often decide the coins still are not good enough. So if a collector buys a lot of coins at the wrong end of the cycle - when grade inflation is most widespread - that collector would be left holding a lot of overgraded coins when the pendulum starts to move the other way and dealers become much more conservative.

Edited to add...yeah, what keets said...simultaneous posting...great minds think alike.

RYK

<< <i>i might agree with your premise if things stayed on some kind of a continuing curve, but what tends to happen IMHO is that coins get overgraded and then the brakes are applied and things go in the reverse direction. then the cycle starts over again. collectors/dealers caught at the wrong point in the cycle who can't wait things out or who mistakenly sell an undergraded coin or buy an overgraded coin certainly lose. >>



I agree with Keets and would also add that the seasoned pros are in the best position to take advantage of the grading cycles, and the average collector is the one most likely to get hurt.

Longacre

<< <i>

<< <i>i might agree with your premise if things stayed on some kind of a continuing curve, but what tends to happen IMHO is that coins get overgraded and then the brakes are applied and things go in the reverse direction. then the cycle starts over again. collectors/dealers caught at the wrong point in the cycle who can't wait things out or who mistakenly sell an undergraded coin or buy an overgraded coin certainly lose. >>



I agree with Keets and would also add that the seasoned pros are in the best position to take advantage of the grading cycles, and the average collector is the one most likely to get hurt. >>




I guess I am the third person in this thread who agrees with Keets.

DoubleEagle59

Is Gradeflation Healthy for the Hobby?

only if you're selling!!

ricko

Make it four agreements.. Keets nailed it. Cheers, RickO

roadrunner

It's been the business model for the USEcononomy since 1913. While 10 years or even 20 years of inflation is tolerated. It doesn't go on forever. The recession in the 1990's sort of forced the hand of the services to loosen up in order for dealers to make money.
Had they stood firm on their grading things might have gotten much worse. Certainly this worked better for dealers than for customers.
How many customers have given away the farm based on 1989 grading standards?

Is it healthy? Short term yes, long term no. It's hard to win long term support outside the current market base if standards are not stable.

roadrunner

badger

I dont' see how gradeflation helps. You would need to increase the top grade to keep things going. MS-75? MS-100?

Badger

keets

i think it's only fair to add that i don't believe this to be some kind of a conspiracy undertaken by each of the grading services. looking at myself, i know my ability to grade and my experiences at viewing more coins changes how i look at things and how i grade, moving in both directions. it's only logical that the same process takes place in even the best Professional Graders. add to that the truth that most graders suffer from burnout or leave for personal reasons which leads to a turnover at PCGS/NGC, causing a difference in quality of grading. we just never know when those things happen and probably interpret the change as "putting on the brakes" or the reverse "gradeflation" when we sense a change. i doubt PCGS/NGC and their graders are so diabolical and proffecient as to be able to either undergrade or overgrade by a point with regularity for extended periods.

from that standpoint, it probably means that when these "swings" happen it's just a small change of the guard and our own paranoia taking hold.

roadrunner

During the mid-1990's NGC was offering a very inexpensive regrade program for dealers. They were soliciting the business and giving away a lot of upgrades. A dealer friend of mine would routinely send in say 10 older holdered coins and get 50% or better upgrades.
I didn't pay real close attention until 1997 but the whole concept seemed odd if consistent grading was the goal.

roadrunner

Arizonadesertrat

<< <i>I can't really see any way that it is unhealthy. Essentially it's has only resulted in some people making a good deal of money, but I don't think it's lost many people much.

It's obvious that the coins themselves don't change, only the grades do. But these grades often result in big $$ differences. As long as we are experiencing grade inflation, rather than deflation, I see no way that it can really hurt anyone at the present. >>



Gradeflation is VERY unhealthy, for several reasons:
1. It makes learning to grade much more difficult. The hobby desperately needs constancy in grading, not grades that ratchet up with time (or market grading, for that matter). Collectors are already looking at TPG holders and making judgments about grading accuracy, based on when they think a particular TPG graded a coin (e.g., this is why coins in PCGS rattler holders are considered desirable). This situation is nutty.
2. There will be a market downturn at some point---coins with inflated grades will fall in value faster because standards (what collectors will accept as solid for a grade) will tighten up.
3. A chunk of the coins that I think have inflated grades were no-doubt results of crack-out artists at work----coins that were exceptionally nice for their grades have been sucked out of the market, cracked out, and resubmitted (sometimes umpteen times, making pop reports unreliable) until they wind up in higher-grade holders. So now these coins have inflated grades, but are low-end. Who wants these? I don't.

jmski52

There's a finite supply of coins, except for what the Mint puts out every year. It stands to reason that the condition of the total population of coins would deteriorate over time, in spite of one's best efforts to preserve them.

Therefore, it is an outright lie to presume that the grades of the entire population of coins is getting "better" through crackouts and resubmittals every single year. If you want to buy into a lie, that's your business.

The problem is that collectors (i.e. net buyers of coins) are always on the losing end of the proposition, to the benefit of the TPGs and to a lesser extent, the dealers. The coin collector is last in the food chain when it comes to gradflation.

Mowgli

I do not think that gradeflation is healthy.

In coin collecting it seems that having a standard grading scheme is beneficial for buyers and sellers. It levels the playing field when we all see the same things. With TPGs we have turned over the grading to someone else and unfortunately the first problem we had was that the TPGs were not consistent with each other. Then we have the problem that they are not consistent within themselves. With that much variability it becomes difficult to maintain a standard. I have talked with a TPG grader who admitted that on any given day he might assign a different grade to the exact same coin.

What also complicates matters is that people tweak assigned grades depending on whether a coin comes weakly struck, was made with rusted dies, had a poor design, was made by horse drawn presses or whatever else accounts for their look besides wear. Why can't the grade be based on the way they look with no accounting for all the other stuff? Maybe there should be a 1926-D Buffalo in a holder that reads "MS with VF details". Keeping technical grading standards and applying them with whatever added verbiage one needs to explain why the coin is worth such and such seems better to me than changing the standards to the market.

Anyway, in my opinion changing standards is an oxymoron and not helpful.

MrEureka

Sometimes, it takes time to really appreciate something in full. The wonder of the universe, the beauty of a flower, the warmth of a small community, etc. So it hardly strikes me as odd or unfortunate that it has taken the TPGs many years to fully appreciate our coins and give them the grades they truly deserve. In fact, when I reflect on the graders' extraordinary progress it gives me goosebumps all over. Way to go, graders!

keets

do you really think the "standard" changes?? it seems more reasonable to accept that the interpretation of the standard changes on an individual basis, that's why it's so easy to disagree on what a grade of a particular coin is. furthermore, it tends to be only the Mint State and Proof grades which really change due to the absolute subjective nature of what we each see. as an example, most grades below MS60 are pretty much locked in dependant on wear and the difference in each grade on a numerical point is wide enough that a small difference in opinion can usually be agreed upon. when we start to haggle over a single point is when the trouble starts.

can you imagine looking at a coin and trying to decide if it was VF22 or VF23??

LonerAnger

There's no gradeflation. What is taking place is simple tenacity and perserverence. Crack an infinite number of coins and each will eventually get a higher number.

(this axiom may not apply to holed coins although I would not bet the ranch)

Keets DID nail it in the first post.

Zoins

<< <i>There's no gradeflation. What is taking place is simple tenacity and perserverence. Crack an infinite number of coins and each will eventually get a higher number. >>

This is actually given as a reason for gradeflation, not to discount it. One issue is whether gradeflation is intention or unintentional on the part of the graders. Graders do not have to be complicit for gradeflation to happen.

291fifth

Gradeflation is just another indicator of the low ethical standards in the hobby. Low ethical standards are not healthy for any hobby.

Nothing is going to change. Collecting hobbies attract unethical individuals...always have...always will.

ram1946

I don't believe it's so much gradeinflation as it is consistency and interpretation. It is physically impossible to do the same thing day in and day out for a long period of time with 100% consistentcy. We all have moods and emotions, highs and lows. Just because one day the coin is grade X and the next day it's grade Y doesn't necessarily imply inflation or deflation. Add new graders who bring different characteristics than the grader they replaced and interpretation further influences the issue. Take the theatre for example. Two renowned actors may interpet Macbeth differently but still provide powerful performances. Doesn't necessarily mean they inflated or deflated the role.

Zoins

<< <i>I don't believe it's so much gradeinflation as it is consistency and interpretation. It is physically impossible to do the same thing day in and day out for a long period of time with 100% consistentcy. We all have moods and emotions, highs and lows. >>

Inconsistency is one reason for gradeflation.

<< <i>Just because one day the coin is grade X and the next day it's grade Y doesn't necessarily imply inflation or deflation. >>

It doesn't but when inconsistency in grading is combined with lack of inconsistency in regrading submissions and/or slamming, the end result can be gradflation.

<< <i>Add new graders who bring different characteristics than the grader they replaced and interpretation further influences the issue. >>

This has also been stated as a possible reason for gradeflation. New graders may not learn how coins were graded by the organization in the past if there are not good grading sets and other training methods in place. TPG grading is often about TPG consistency across all their graders, not what any individual grader says. That's why they use consensus and often don't tell you who the individual graders are - it shouldn't matter.

<< <i>Take the theatre for example. Two renowned actors may interpet Macbeth differently but still provide powerful performances. Doesn't necessarily mean they inflated or deflated the role. >>

I'm not sure how this applies. A better example may be if a theater had a great actor and charged ticket prices for that performance but then replaced the actor with one less powerful while charging the same price. In this example the theater is involved but with coins, the graders only need to supply randomness and inconsistency.

EagleEye

A "gift grade" is defined as a coin that upgrades when it did not deserve it.

Every gift grade that is given out makes one person some money, but cheapens the other coins in that grade slightly. In 1995 a MS-65 Flying Eagle Cent was very hard to get and they sold for $3,000 to $4,000. Now many I see out there look like gift graded coins and the prices range from $3,000 to $4,500. Here is a popular coin that should be worth $5,000 to $7,000 in true gem condition, but the prices have been held back by the multitude of gift graded coins bouncing from auction to auction for ever cheaper numbers.

jdillane

I agree with keets too. I would add that it seems to be a function of the coin market cycle. As with so many markets, the cycle is like a pendulum. The more it swings, the more it seems to swing back! This of course, undermines the stability of the market. Almost as certain as death and taxes. The challenge lies in the timing.

ziggy29

Gradeflation results in a numismatic equivalent of the Peter Principle: all slabbed coins are cracked out over and over again over time, until they are in an overgraded holder. They rise to the level of their final resting grade.

At some point, even if grading standards correct, you still have a lot of coins in overgraded coffins which no one will crack out. I don't see how that can possible be a good thing.

Elcontador

Inconsistency makes a mockery of any so called standards pertaining to any business model.

It basically means that if you had a coin slabbed 5 or 10 years ago, you really don't know what that particular coin grades today. Sure, if you 'shop' it and look at many currently graded examples, you can get a reasonably good idea. But if the coin sells for $1,500 in a 4 holder and $5,000 in a 5 holder, a reasonably good idea isn't good enough. If you really could rely on the number on the slab, you wouldn't have people resubmitting / cracking coins out now, would you?