Does the 10-year limitation on NGC's guarantee benefit PCGS?

IGWT

Here's the limitation that we're talking about:

The NGC Guarantee does not apply to copper, bronze or copper nickel coins graded by NGC prior to April 1, 2000.

To the extent that the NGC Guarantee applies to copper, bronze, or copper nickel coins, the NGC Guarantee expires with respect to such coin(s) on the ten year anniversary of the date of encapsulation by NGC.

At the FUN show luncheon, Mark Salzberg and Scott Schechter kindly fielded questions from attendees, and one collector asked whether or not it is possible to determine the date of encapsulation by the serial number on the slab tag. The answer is "currently, no," but Scott acknowledged -- even though this subject wasn't the purpose of the question -- that NGC soon must find a way to let collectors know whether or not the 10-year guarantee period has expired for any particular copper, bronze, or copper-nickel coin. I was aware of the limitation before Scott mentioned it, but I hadn't really focused on it, and maybe I should at this point.

All of the coins in my collection are either copper-nickel or copper, and most are housed in either NGC or PCGS holders. I haven't developed an overriding preference for one service or the other (although I certainly appreciate and favor NGC for the way it treats the collecting community). The coins that are now in NGC slabs would stay in NGC slabs if the guarantee period weren't limited. But, as the 10-year periods for these coins come to an end, I will have to decide -- assuming that I don't want any guarantees to expire -- whether to resubmit the coins to NGC or to cross them to PCGS.

The expiration of the NGC guarantee is pushing me toward PCGS. The PCGS guarantee is not limited on copper-nickel or copper coins (or, at least the guarantee is limited only by PCGS's financial stability, which is another issue). The market as a whole, whether it's right or wrong, generally assigns a higher value to U.S. coins slabbed by PCGS. PCGS holders display smaller coins more attractively than NGC holders, in my opinion, even taking the new scratch-resistant NGC slab into account. So, if the guarantee for my coins is about to expire, why should I send them back to NGC instead of to PCGS?

Here's just a small sampling of coins that I'll likely look to cross to PCGS when the NGC guarantee expires:









It seems to me that NGC might lose more than it gains by the 10-year limitation on its grade guarantee. There are already more than enough reasons to send coins to PCGS instead of to NGC . . . why add another? Also, while I understand that the limitation is meant to reduce the NGC's risk of liability on the grade guarantee, I'm not sure that the risk is reduced an appreciable amount. A coin that has been stable in a holder for 10 years is highly unlikely to turn . . . certaiinly a lot less likely than one that has just been slabbed. The 10-year period seems arbitrary to me.

pennyannie

If you send in a NGC cent that has been graded for 9 plus years for a reholder does the 10 year guarentee start over?

I am sure NGC has run the numbers and decided that a 10 year guarente does not hurt them that much in business. They still grade tons of cents. I can see a few coins that would be better off in PCGS but the bulk makes no difference in my opinion.

Longacre

I think you and I should start a business writing third party insurance on coins that are outside of the guarantee period. Then we can always bundle the contracts into some sort of financial product and sell it on the market. We will make millions.

IGWT

I think you and I should start a business writing third party insurance on coins that are outside of the guarantee period. Then we can always bundle the contracts into some sort of financial product and sell it on the market. We will make millions.

Right idea, but you're not maximizing the potential return while minimizing the risk. I just got off the horn with Dave Moffett at Freddie Mac. So long as the third-party insurance is purchased with the proceeds of a home equity loan, Freddie Mac is willing to make the loans and to underwrite the insurance.

coinkat

There is usually some type of Statute of limitations that should apply... In this instance a 10 year statute of repose seems reasonable

PerryHall

If NGC's grade guarantee for copper and copper-nickel coins is only good for 10 years, they need to put an expiration date on their slabs. And, yes, NGC's weak grade guarantee does benefit PCGS.

Coxe

<< <i>If NGC's grade guarantee for copper and copper-nickel coins is only good for 10 years, they need to put an expiration date on their slabs. And, yes, NGC's weak grade guarantee does benefit PCGS. >>



I believe they could face a legal challenge to this guarantee, one where they don't necessarily have solid protection. The problem is that the submitter could be trade-wise quite distant from a claimant. There is no way for the market to responsibly judge value, per the guarantee, on copper alloy coins. The liquidity of NGC copper becomes increasingly questionable and they are effectively abandoning that part of the market. I do understand their frustration and there really is no responsible way of maintaining a guarantee for those coins. Even if PCGS has a guarantee and even if they had a conservation effort for each such coin prior to encapsulation (not saying they do or will), they are no more immune from the liability too.

stephunter

That 1878 is cool!

COALPORTER

Does the copper nickel 10 year quarantee limit apply to 3 and 5 cent nickels or just CN small cents ? Is there much chance of a 3 or 5 center changing in the holder?

lkeigwin

NGC's copper guarantee is a joke, especially since it' so difficult to know when the grading was done. I'm through with them. Everything copper I own (about 95% of my collection) has been moved to PCGS.

This, plus the fact that every respected dealer I work with downgrades NGC copper by a point or two, means I rarely look at NGC copper. (Sure, there are exceptions. They just take a lot of extra effort to justify.)

Lance.

BAJJERFAN

<< <i>If you send in a NGC cent that has been graded for 9 plus years for a reholder does the 10 year guarentee start over?

I am sure NGC has run the numbers and decided that a 10 year guarente does not hurt them that much in business. They still grade tons of cents. I can see a few coins that would be better off in PCGS but the bulk makes no difference in my opinion. >>



I'd say no since the cert number doesn't change upon reholder. The 10 year guarantee applies to the cert number/coin/slab unit.

asheland

I stick with PCGS for my copper coins.

MrEureka

I don't see how any TPG will ever have enough money to honor a perpetual guaranty that their coins don't "turn". In other words, NGC's stated limits may not make their guaranty any less valuable than PCGS's.

Frankcoins

How can any company guarantee that billions of dollars in coins will never be affected by oxidation, since the slabs have air in them?

IGWT

I don't see how any TPG will ever have enough money to honor a perpetual guaranty that their coins don't "turn". In other words, NGC's stated limits may not make their guaranty any less valuable than PCGS's.

PCGS's guaranty will be more valuable (and add greater value to a coin) so long as it's perceived to be more valuable. And whether or not there will be enough money depends on the percentage of coins that "turn." It's not necessary to reserve enough money to cover all coins.

MrEureka

And whether or not there will be enough money depends on the percentage of coins that "turn."

They're almost all going to "turn" in time. We just don't know how long it will take.

Unknown

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Coxe

<< <i>I don't see how any TPG will ever have enough money to honor a perpetual guaranty that their coins don't "turn". In other words, NGC's stated limits may not make their guaranty any less valuable than PCGS's. >>



I don't see how any TPG can long term maintain a grade guarantee at all. They have built up huge backlogs of accumulated liability. The enterprising OGH upgrades will turn to enterprising downgrade challenges in time. The absolute worst thing the TPGs could have done, from a business perspective IMO, was to attempt to tighten their standards. Yes, it is good for the hobby. But what about valuation divergences when their old grades are called into question? This is a rockier business with a more uncertain future than many people probably appreciate.