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Does gradeflation impact the hobby?
Zoins
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Recently there have been comments about gradeflation being a primary culprit in reducing interest in the hobby, moving away from US coins because of gradeflation, and numerous people being afraid of owning coins where populations could go up significantly.
How big of an issue is it?
I tend to collect areas where it isn't meaningful but I am interested in the overall health of the hobby.
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As long as people are interested in the overall health of the hobby, the hobby is healthy.
Damn I'm pithy tonight.
Time to quote some typos.
Gradeflation is not systemic in my view. It's a small sample Size of people getting lucky... out of the millions of coins that are accurately graded.
I submit coins regularly and don't recall the last time I was surprised by a higher grade. In fact in what I collect I feel (at least PCGS) is very consistent and has been for a while.
Wow... another 'health of the hobby' post.... First of all.. the hobby is very healthy..just look at the TPG and FPG figures. Second, the hobby has been around 'forever', so to speak and will continue. Third, for those of us not in the business, it is just a HOBBY.... Fourth, IMO, those worrying about the 'health of the hobby' must be in the business, otherwise, just keep collecting and having fun. OK..back to my coins/hobby. Cheers, RickO
Grade-flation is driving up prices for collectors, such as I, who are looking for attractive collector coins. I can cite some concrete examples of this because I have purchased the coins and can show where those pieces were sold in major public auctions in holders with lower grades on them.
In one instance the coin is clearly over graded without question. I bought the the coin, which was a major 5 figure purchase, because it is very scarce to rare in the choice AU and Mint State grades. I wanted an example that would compare favorability with the rest of coins in my set. As Dr. Sheldon wrote in ^Penny Whimsy^ sometimes the collector in you "bites hard."
I'm not comfortable with doing this on a regular basis. Buying over graded coins will come back to haunt you, and fourth party graders like CAC could make such coins major liabilities when it comes time to sell. Therefore I am coming to the point where it might be time for me to end my major participation in the U.S. coin market, once the two sets I trying to complete are finished.
This is not an easy decision for me, but you can't keep paying high prices for coins where the grades are built on sand. Your can't expect grading to be built with stone, but you do need to feel that there are some standards that in force. Right now I don't see that those standards are being applied.
This week "The Gray Sheet" claimed that the two leading grading services have tightened up their standards and that the market is improving. Time will tell if that is true. Under its old management "The Gray Sheet" was often a cheerleader instead of a truth reporter on such matters. Perhaps things will be different under the new owners.
I see more whining in type than I hear in reality.
The coins haven't changed, just the numbers on plastic. Rare coins will always be desirable and the finest known classic coins will always be the finest regardless of their assigned grades.
Gradeflation does hurt coins for which the majority of the value was related to the numeric grade commanding a far greater value compared with the grade one point lower.
Hurting individual coins does not necessarily hurt the hobby.
Crusty collectors will find any number of reasons to be pessimistic about the future of the hobby (lack of young collectors, slabs, stickers, plus grades, doctoring, counterfeits, grading standard changes, hoarding, auction fees, natural vs artificial toning, poor US mint designs, and the list goes on). All of these are annoyances, but the only one that presents a fundamental danger to the survival of the hobby is counterfeiting.
Something like gradeflation won't make or break the hobby. Grading and TPGs can be a distractino for new collectors that prevents them from getting into other more important areas of the hobby (I think).
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Let's see if you will continue to call it "whining" after you have paid $20,000 for a coin that previously sold for $8,000 less than that merely because it was upgraded from AU-58 to MS-61. In this case you are not seeing both sides.
@BillJones replied: "Let's see if you will continue to call it "whining" after you have paid $20,000 for a coin that previously sold for $8,000 less than that merely because it was upgraded from AU-58 to MS-61. In this case you are not seeing both sides."
IMO, the worse gradeflation is behind us because AU-53's and AU-55's ALREADY have Mint State labels. It is so stupid obvious that any more pushing grades will cause a revolt. Presently there is an MS-64 or 65 quarter being discussed with an MS-67+ label. The general consensus is the coin is over graded. The TPGS need to get real!
This claim has been made multiple times over the past decade, maybe longer. And I don't think it's true. Tightening may occur for a week(s), a month(s), but never for years. I heard all the claims in 2009-2011 about tightening it up and CAC was right there to lead the charge. Now look where we are....longing for the "conservatism" of 2006-2008. One could say, that the slabbed coin market/hobby IS all about grade-inflation. That's the engine that drives a big % of dealer profits. At least that's been what the past 20-22 yrs have been about. Grade-flation just might be THE hobby....at least for slabees.
I had one of those. A slabbed AU58 1803 half dime. To be honest, the coin was lightly cleaned but sharp as any unc. And still attractive. No obvious rub. Only 15-20% luster left. A couple good digs/light scratches on it. A couple months after I sold it, it reappeared at auction as MS62 with the price going up from $9500 to $14,200+. That's not a coin I'd ever want to buy back. It was tough to sell for $9500 as most major players in that kind of coin offered $7K-$8K max. None of them (or I) saw any MS60+ unc potential. The orig owner sold the coin raw to a local shop and they didn't get any more than $4K for it.....likely a lot less. The price guides being too low didn't help any. Between grading, price guides, and market timing/dealer liquidity, it's a jungle out there.
And here is the little NOT-so-secret. Service "A" is rolling along with a big customer who sends in some sub-standard coins and gets "creamed." He calls to squawk and does not get satisfaction and takes his business to Service "B." All goes well until the same thing happens and he squawks! The big submitters have consistently "forced" the TPGS to inflate the grades. This has been going on especially since the late 1990's.
**This week "The Gray Sheet" claimed that the two leading grading services have tightened up their standards and that the market is improving.
**
This to me is more annoying than long term trends towards generally looser.
Now the services are 'tight' again I guess. I guess we'll see if more people are getting downgrades when resubmitting, or if the % of coins in fresh holders getting green stickers
goes up.
Anyone who has been around for a decade knows that the market and TPGS's loosen and tighten at various times. People who continuously use the services notice these changes first. Perhaps, dealers and collectors have had enough - causing the NGC attack and the PCGS reply. What is very unusual is there is something in print stating that the grading will get tighter!
Hell, most of the dealers I know couldn't use a grey sheet "fairly" to save their souls. But that's another story , unlike gradeflation. Or is it the same thing, except in type ? Speaking of wine.
In times past, the lose grading occurred during boom time periods for the market. In those markets sales were easy, and dealers were able to slip the over graded to clients who didn't know any better or to those who figured they could get a quick flap. When the market cooled down, the grading got tighter. The theory was the tougher grades would firm the prices.
Today it seems that what many people call a bear market is resulting in the opposite. The grading is watered down, and sellers try to make their money by selling the former AUs, which are now Mint States for Mint State prices. If this continues we will be back to the bad old days when dealers played fast and loose with the grades to overcharge customers. This was a situation the third party grading was created to correct.
I see no problem from grade inflation - a recent OGH crack out received the same grade.
If u think y current material will get some higher grade submit away.
Sadly many buyers overpaid and have an inflated idea what their coins will bring in current market conditions. Toning (tarnish) is chemical damage to the coin which will get worse over time. Once this happened the coin is no longer original. Good news conservation or a good dip may restore the coins originality but it will need be cracked out / resubmitted.
And reward the TPGs for bad behavior? No way.
One thing that some collectors don't realize is the cost and risk associated with resubmissions. I have a couple of coins that would cost me thousands of dollars to have them regraded because the fees are based upon the market value once you get to a certain level.
I won't even consider playing this game until it's time for me sell. In the mean time grade-flation is helping to drive up the cost of every coin on my want list.
If market improving then bids will increase otherwise take w grain of salt.
The current health of the coin market and "gradeflation" are not congruent in any way. We're at least five years into a bear market that is due, perhaps overdue, to turn upwards very soon.
An uptrend will start in 2018, perhaps even in 4Q17.
Look at business strike Liberty Nickels in MS 66 and their pops over the last three or four years. Nothing more needs to be said in this matter.
If you bought a scarcer date in this grade three or four years ago, you would not be a happy camper if you were holding it right now. I am a good $8-10K underwater on these coins right now because of this.
I turned down an a very nice 1896 for $6K last year. It as a $14K coin at the end of 2014.
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"Sou Mangueira......."
Absolutely. Truly awful coins are placed on the same playing field as wholesome coins. Not every collector has the time and resources to submit 3x++ like a large national dealer to get the upgrade the coin deserves under today's watered down standards. CAC is a help to some degree, but there are still wholesome coins that are accurately graded but maybe only B- or C+ that are now grouped with blatantly overgraded and problem pieces that are the new exemplars for the grade. The net result is diminished liquidity (depending on the coin and series) and deflated prices.
Does this effect the enjoyment of the hobby? I understand that the purpose is to have fun, but I don't understand how someone who could lose tens of thousands of dollars or more (as many have invested here) in this hobby wouldn't worry about the real prospect of being the last one left when the music stops and the market really does crash. I don't care if you are a multimillionaire - multimillionaires usually don't stay that way by making poor financial decisions. The current pace is not sustainable IMO.
As for CAC, it has helped some, but exactly how much difference/spread are collectors really going to accept for CAC versus non-CAC standard coins? I don't think CAC stickered coins will be excepted from this black hole. Sadly, in some ways, I think CAC itself has also acquiesced in grade inflation (look at some of those key date circulated coins - 1877 IHC for example)
This is exactly one of the series that I had in mind. Many of the coins have lost half of their value or more. If I recall correctly, I saw a proof DCAM sell for a quarter of what it sold less than a decade ago. Looking through the Heritage archives at many of the dates (e.g. business strike 1891 for instance) and zooming in closely reveals that the difference between current and older grading standards is like the difference between night and day. Many of today's MS66s would likely be 65s or lower from before. Some of them I would pass on if offered as a MS65.
I agree 100%. Also, why would the TPGs want to tighten up at all? Grade inflation ensures that there are far fewer guarantee payouts (yesterday's overgraded coin is today's accurately graded coin), and it drives large numbers of resubmissions providing additional revenue.
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It is a larger problem than 90% of the posters here realize. Of course, less than half the posters here see their involvement as a hobby.
Yep............people are losing their behinds on a lot of dates and mints. I try not to look at that factor of the hobby.
Sure, it is very upsetting to try to complete a collection hobbywise, pay the big price, then watch it all tumble. I feel bad also, but I realize that I ain't doing this for any reason other than I like the things I have, Unless the world ends I'm going to keep the things I have, and I'm going to ENJOY what I have, while educating my descendants who will get it all one day.
Pete