Grading, pricing, absurdity,and too much time on my hands.......
BryceM
Posts: 11,866 ✭✭✭✭✭
If you hang around the coin community long enough you start to hear and even believe some really funny things. Many of these things get repeated and some of them become virtual dogma. When it comes to grading, it's almost universally accepted that "solid for grade" coins are better than "barely there coins." This idea strikes me as absurd. Let me illustrate:
Caveats: I know grading is subjective. I know inter-observer reliability and test-retest reliability in grading is poor. I know grading in tenths of points is ridiculous. I know that grading standards change with time. There is some protection to be had if you're holding the "nice for grade coin" when standards shift, etc., etc. Bear with me........
The 1922 Philadelphia Peace dollar is an incredibly common issue. Assuming no crack-outs, the PCGS Pop Reports show that there are this many graded examples:
MS-63 58,100
MS-64 44,961
MS-63 3,680
MS-66 763
MS-67 24
Let's assume that you could take all 107,528 of these coins and lay them out on a large table. Let's then take the 100 best graders in the world and ask each of them in turn to arrange these coins in order from best to worst. We'll repeat this exercise 10 or 20 times to ensure accuracy and finally we'll average the results. Each coin can now be assigned a numerical grade that we can all agree will be its "True Grade". Taking some liberties, and rounding to the nearest tenth of a grade, the distribution might look something like this:
Because there are very few coins at the top end, the data is easier to show with a logarithmic graph like this:
We can see right away that there is a sharp drop-off somewhere between MS-64 and MS-65. Probably this occurrence reflects the true quality of what is extant and part of this might be due to the notion that it takes something special for a coin to achieve "gem" status. We can see from the Price Guide that there is a sharp jump in price between MS66+ and MS67. This likely reflects what happens when scarcity collides with the existence of a handful of truly wealthy individuals who chase "Only the Best."
Ever since the advent of the Sheldon scale and its ongoing divisions, certain coins have always been considered nice for grade. This has been called "Plus", "Plus Plus", "PQ", "PPPPPQ", "Virtually the next grade", and a whole slug of other things. The two TPGs jointly decided to create plus grades a few years back. Per the announcement, this was felt to represent perhaps the top 15 or 20% of the coins in each grade. This looks something like this:
Certain other grading services have divided up coins within each grade into "A" coins, "B" coins, and "C" coins. They put their stickers on the slabs of all but the "C" coins and are ordinarily agreeable to thereafter purchase the stickered coins at a published price. This might look something like this:
All of this is fine and good. Markets seek reassurance and definition, and confidence and liquidity have been greatly assisted by the advent of the various grading services.
Here's where it gets weird. Most of us here are conditioned to hunt for the finest coins in each grade. Posting a photo of a coin that is low quality for grade is often grounds for ridicule, criticism, or a general public flogging. I know I enjoy it immensely when I post a coin that everyone says is clearly sharp for grade. I have several coins that I don't show for fear of having the obvious pointed out to me.
The sentiment has been carried to the point that some find it desirable to buy MS65 coins, crack them out, and get them into 64+ holders with a sticker. To each his own I suppose.
Are we to believe that the coins in blue are worthless junk that we should be ashamed to own?
Are we to believe that MS63 coins should sell for around $52 while the MS63+ coins should retail for $53? Should the 66.01 coin sell for $700 while the 66.99 (plus, stickered) coin should sell for $2,025? Per the Price Guide the 67.00 coin should sell for $13,500. Obviously this is absurd, and variations in quality are obviously reflected in auction results....... or are they? If you look carefully at auction prices, any coin that makes the grade above "the jump" trades for multiples of the nicest coin at the next grade down. In the last eight years, no 1922 Peace dollars have traded between $3,100 and $8,000 on Heritage. The MS67 coins go for more and the MS66+ coins go for less. Is that logical? I say nay nay. Surely there is a really, really stellar 1922 MS66+ coin out there somewhere that is the virtual twin of an MS67 coin selling for three times as much.
Perhaps the real trick is to understand that there is a reasonably fair price for a coin at each point along the continuum and to be able to grade well enough to understand this..... All of this to accomplish the actual goal, which is to have fun (if you're a collector), or make a living (if you're a dealer).
OK. My brain is tired and I'm out of time. What say you?
Caveats: I know grading is subjective. I know inter-observer reliability and test-retest reliability in grading is poor. I know grading in tenths of points is ridiculous. I know that grading standards change with time. There is some protection to be had if you're holding the "nice for grade coin" when standards shift, etc., etc. Bear with me........
The 1922 Philadelphia Peace dollar is an incredibly common issue. Assuming no crack-outs, the PCGS Pop Reports show that there are this many graded examples:
MS-63 58,100
MS-64 44,961
MS-63 3,680
MS-66 763
MS-67 24
Let's assume that you could take all 107,528 of these coins and lay them out on a large table. Let's then take the 100 best graders in the world and ask each of them in turn to arrange these coins in order from best to worst. We'll repeat this exercise 10 or 20 times to ensure accuracy and finally we'll average the results. Each coin can now be assigned a numerical grade that we can all agree will be its "True Grade". Taking some liberties, and rounding to the nearest tenth of a grade, the distribution might look something like this:
Because there are very few coins at the top end, the data is easier to show with a logarithmic graph like this:
We can see right away that there is a sharp drop-off somewhere between MS-64 and MS-65. Probably this occurrence reflects the true quality of what is extant and part of this might be due to the notion that it takes something special for a coin to achieve "gem" status. We can see from the Price Guide that there is a sharp jump in price between MS66+ and MS67. This likely reflects what happens when scarcity collides with the existence of a handful of truly wealthy individuals who chase "Only the Best."
Ever since the advent of the Sheldon scale and its ongoing divisions, certain coins have always been considered nice for grade. This has been called "Plus", "Plus Plus", "PQ", "PPPPPQ", "Virtually the next grade", and a whole slug of other things. The two TPGs jointly decided to create plus grades a few years back. Per the announcement, this was felt to represent perhaps the top 15 or 20% of the coins in each grade. This looks something like this:
Certain other grading services have divided up coins within each grade into "A" coins, "B" coins, and "C" coins. They put their stickers on the slabs of all but the "C" coins and are ordinarily agreeable to thereafter purchase the stickered coins at a published price. This might look something like this:
All of this is fine and good. Markets seek reassurance and definition, and confidence and liquidity have been greatly assisted by the advent of the various grading services.
Here's where it gets weird. Most of us here are conditioned to hunt for the finest coins in each grade. Posting a photo of a coin that is low quality for grade is often grounds for ridicule, criticism, or a general public flogging. I know I enjoy it immensely when I post a coin that everyone says is clearly sharp for grade. I have several coins that I don't show for fear of having the obvious pointed out to me.
The sentiment has been carried to the point that some find it desirable to buy MS65 coins, crack them out, and get them into 64+ holders with a sticker. To each his own I suppose.Are we to believe that the coins in blue are worthless junk that we should be ashamed to own?
Are we to believe that MS63 coins should sell for around $52 while the MS63+ coins should retail for $53? Should the 66.01 coin sell for $700 while the 66.99 (plus, stickered) coin should sell for $2,025? Per the Price Guide the 67.00 coin should sell for $13,500. Obviously this is absurd, and variations in quality are obviously reflected in auction results....... or are they? If you look carefully at auction prices, any coin that makes the grade above "the jump" trades for multiples of the nicest coin at the next grade down. In the last eight years, no 1922 Peace dollars have traded between $3,100 and $8,000 on Heritage. The MS67 coins go for more and the MS66+ coins go for less. Is that logical? I say nay nay. Surely there is a really, really stellar 1922 MS66+ coin out there somewhere that is the virtual twin of an MS67 coin selling for three times as much.
Perhaps the real trick is to understand that there is a reasonably fair price for a coin at each point along the continuum and to be able to grade well enough to understand this..... All of this to accomplish the actual goal, which is to have fun (if you're a collector), or make a living (if you're a dealer).
OK. My brain is tired and I'm out of time. What say you?
0
Comments
``https://ebay.us/m/KxolR5
If you believe this formula, you will understand the price difference between 66.99 and 67.01 in today's market.
realm of sight-unseen transactions. When coins are actually viewed, one does observe wide ranges
of realized prices within any given grade for a particular issue. We also need to remember that the selling
price of a coin is driven by many other factors than the assigned grade and actual quality of the coin itself.
Your points are well-taken, however.
But I'm happy I'm a "mid-grade" collector, and don't have to worry as much about the 'quest for the best', and sucking the fun out of the hobby.
A 1922 Peace, as used as an example here, is a perfect example. They are all over the place, in virtually every grade. So if for instance I decide that MS-64 is the right grade for me, based on general look and price, then all I have to do is find one that has the right look FOR ME. The price spread from the BEST MS-64 to the WORST MS-64 isn't that significant....bordering on completely insignificant. And we already know it will be an imperfect coin.....because if it was perfect, it sure as heck wouldn't be an MS-64!
Surely, that doesn't mean I buy the first one I see, so the quest for a nice coin remains. But the intricacies of finding the truely magnificent, and stressing over what is the right price falls away. Coin collecting remains a hobby. And that's the way I like it.
Tom
unjustly inflate prices. It hypes the coin for an uniformed or YN collector into spending more. It makes money for some people who sell for a living.
<< <i>..... grading in tenths of points is ridiculous. >>
Truer words have never been spoken.
Great transactions with oih82w8, JasonGaming, Moose1913.
one caveat to all of this is that there is no "pricing God" out there. i find it funny that people quote prices like they are gospel. they are merely analytics that some outfits proliferate and others repeat. then we start believing that the price is some quantitative measure of value. it's not.
prices are reflective of what people are willing to pay. if people are willing to pay $60 for an ms-64, and $13,000 for an ms-67, then that's what their worth (no more, no less). if an ms-67 trades at $4,000 enough times, well then the market price is now $4,000.
the point is that in free market capitalism a price is nothing more than a measure of what someone is willing to pay, to say a certain numerical grade on a piece of plastic is worth a certain price is irrelevant (but it happens 5,000 times per day anyway). if you want a house, car, painting (fill in the blank) bad enough you will pay whatever, and to you that's what it is worth. it might be worth more or less to someone else. same goes for food. in times square a big mac is $xx, in a small town in the central states it is $yy. one could argue that a burger is better or worse, but the market sets the price point at any given time.
the whole exercise in trying to understand pricing is interesting but irrelevant. if you are buying something with the hopes of reselling it at a gain, well then you are more of an investor rather than a collector, which is 100% ok. but then pricing becomes more important than the coin because ultimately your aim is not to collect something but buy it, own it long enough for it to appreciate in value, and then sell it. if you are collecting, then you will buy something because a) you like it, b) you can afford it. when you walk out of a restaurant that cost $400 for 4 people, you are probably as satisfied with your choice as a 4 people who just spent $100...but you ascribed $400 to the value of your food and they ascribed $100 to theirs.
net-net, i thoroughly enjoy all the threads here about price/value. mostly i just chuckle
Calling a coin dreck that is low end for the grade is not really fair. It is just low-end for the grade. Would a coin in 65 that was in your dreck range, be considered dreck if it was downgraded into 64 holder? What if then it was given a Gold bean?
<< <i>Love the graphs but....
Calling a coin dreck that is low end for the grade is not really fair. It is just low-end for the grade. Would a coin in 65 that was in your dreck range, be considered dreck if it was downgraded into 64 holder? What if then it was given a Gold bean? >>
Well, that's exactly my point. I personally don't like the term. I might apply it to "messed-with" coins, but everything can be worth owning. I have zero problem with low-end for grade coins, provided I didn't pay full freight for them. This sort of attitude isn't terribly popular here though.... just trying to point out the absurdity of the concept that only a small subset of coins in each grade are worthy of owning. There really are people would prefer a stickered, plus coin than a coin the next grade up.
I'm probably moving more toward how TommyType is looking at things. Find coins you like, and carry enough knowledge around in your back pocket to know if you're about to overpay for it. It is a hobby after all.
Probably what drives the thinking is the common occurrence of seeing endless hoards of "barely-there" coins for sale at unrealistic "PQ" prices. I've never once been offered a coin at a reduced price for being "low-end for grade". The opposite thing happens all the time.
<< <i>Price = function of (registry competition)
If you believe this formula, you will understand the price difference between 66.99 and 67.01 in today's market.
This is part of it, but probably not in the case of the 1922 Peace dollar. Apart maybe from a 1922 type set, the 1922 is a common date and having one graded higher than the next guy doesn't help that much. It carries a weighted value of 1 in the composition of the Peace Dollar, Circulation Strikes Registry. There are 24 coins in the set but the 1922-P accounts for only 0.76% of the total registry score. The 1928-S (with a weight of 10) carries 7.7% of the set's score by itself.
I really enjoyed this post and graphs.
You make some great points and observations.
It gets a little too fine for me when you separate out the B coins.
Thanks.
"If I say something in the woods and my wife isn't there to hear it.....am I still wrong?"
My Washington Quarter Registry set...in progress
The MS66+ coins keep getting tried until they become MS67 low end coins. That's the cycle. There is no incentive to downgrade an MS67 1922 Peace Dollar to MS66+ just to get a sticker or avoid it being called low end. The MS67 coin is essentially always worth more. Exceptions would include things like MS66 rattlers that could easily upgrade. There's so much risk in paying a big premium for a 66+ coin in order to try and get the upgrade. So the
market has generally decided that $3,000 is the level where anything higher is too much risk.....unless the coin literally walks on water and was totally misgraded the last time in. You won't see this type of "step" pricing quite as much with say gem type coins in the 66 to 67 grade. It's not unusual at all to see 66+ type coins bring low end 67 money (and for low end 67 type coins bring high end 66 money).
<< <i>That is a very good visual representation of the value coins assuming priced at appropriate levels in line with the grade. Great post >>
I agree...this is GREAT post. It shows something that I personally have thought about for years but not being able to convey it properly.
Again...terrific post!
jom