Gradeinflation taking a break--opinion
BIGAL2749
Posts: 742 ✭✭✭✭
Just my opinion but this week I attended a show in Mid-Massachusetts and had a couple of dealers talk about the potential of sending their coin (that they had for sale) for a regrade since standards are a lot looser now and their coin had a good chance to upgrade. Their coins were both in relatively new holders (bright blue current label).
I agree that over last two decades grades have relaxed but in a poor market I would think TPG would have tightened standards
so their product has an easier time selling at Current levels.
I have to admit I haven't run across many coins at the auctions that I could buy at what I thought was good value but still expect the time will come and it will be easier to get solid for the grade coins
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Sales gimmick. Everyone wants to buy something that is undervalued, right?
The pops have absolutely EXPLODED in the last 2 decades... and the pop reports are there for all to see.
For example, 20 yrs ago I think there were only two 1949-D halves in MS66, today the pop is more like two dozen! (I can't access the pop info right now).
This has happened in virtually every series.
There is no indication that gradeflation has/will slow down.
1996-2003 was a fairly weak market, yet gradeflation flourished. In my mind the great gradeflation of 1996-1998 really began to help jump start the market following the Pittman and Eliasberg sales. I don't know what the precise catalyst was that ignited it...but something had to be the spark. I know that NGC came up with a new dealer policy in those years to encourage dealers to resubmit older slabbed coins (a submission fee discount as I recall). One dealer told me about it and said he was batting 80% upgrades on his first few submissions. It could be that submission fees/revenues for the TPG's were waning into the 1994-1996 coin market lows. What better way to turn things around than to loosen up the grading spectrum?
Gradeflation can occur at any point in time. All that takes is the right 3 graders on the right day of any week. The big boyz track such data to determine when the best time is to send a particular coin back in. Any edge is worth exploiting.
I always wondered what effect ICG had on the late 90's, early 00's grading standards. Hard to believe now, but at the time ICG started operations, they were viewed as a real competitor in the grading market. I don't have a feel for how they graded in general, but they seemed loose on moderns...and I think they were the first to break the "PF/MS-70 Barrier".
Was there any influence on the other "big boys" to loosen standards during this time due to ICG?
Added: I seem to recall that SEGS started in the same general timeframe, possibly magnifying the competition, and desire to "keep the submitters happy".
I honestly cannot find any value in population reports from any TPG or CAC. There is no effective method of keeping them current so they became inaccurate shortly after they were created and there is no way to improve the accuracy once it has been lost.
I note in the CAC population report that they show a total of around 8200 Mercs ( FB and non FB combined ) green stickered while at the same time showing 11,000 Peace dollars with green stickers. Are these numbers correct? Only in showing the number of stickers applied to each coin type, not in how many exist. I know of one dealer who submits Peace dollars to PCGS, then to CAC. They are then held in inventory for a show or two but then then get cracked out and sent in raw to PCGS for a possible upgrade. If they come back the same grade, they go back to CAC for a sticker and then back into inventory for a bit. Then the cycle repeats. Does he let CAC and PCGS know of all the certs that are no longer valid? Who knows. How many folks do the same thing? You get the point.
Your best friend against grade inflation is to study all of the available data out there (that is reliable) and assemble it in a way that it can be effectively analyzed and acted upon to increase the number of coins in the 'likely strong for the grade' category that you get to look at.
Pop reports are only so useful. Collecting in high grade Barber Dimes Ive found many bad certs from either TPG. One coin graded MS67 NGC has 2 certs there, and has since crossed to PCGS as a 67 and now a 67+. All are still in the population report, making the grade look much easier to obtain than it really is, resulting in declining sales prices over the last decade from regrades.
Although it is true that the populations of many series have greatly increased over the past 20 years, it's also true that the populations have not greatly increased for many rare coins. Stating that "The pops have absolutely EXPLODED in the last 2 decades" really requires a clear definition of Exploded. IMHO, stating that "This has happened in virtually every series" is simply not accurate, especially for many early coins. In many cases current populations are very close to previous estimates, in some cases they are lower. Sometimes it's interesting to look at the rate that populations increase. For rare coins it can be important to factor in re-submissions.
The best of the best population is probably close to accurate. No one in their right mind will crack those out so when they are regraded, the old cert # comes off. I have an MS68 Morgan that I think is 68+. I will never crack it because if it goes down 1/2 a point, I am screwed!
You are correct. I mostly deal with moderns.
I should have said, "Pop's for virtually all 20th century coins have EXPLODED."
Now that the POP report is back on-line, I see I WAAYYYY understated how much gradeflation has taken place in moderns.
I had guessed at the pop on MS66 1949-D halfs rising to 2 dozen.
I was way off! There are nearly 90 now!!!!
In light of the above, I decided that any expensive coin I purchase will be one that is not only solid for the grade, but is unlikely to see new ones made anytime soon. Ie., I bought a better date Capped Bust Half in PC 4, and passed on an all there Liberty Nickel in PC 6. They were priced similarly.
"Seu cabra da peste,
"Sou Mangueira......."
Would love to see this coin. I bet it is stunningly beautiful. (Any chance it is your Avatar?)
peacockcoins
Numbers game, hard to blame modern coins coming up in higher grades as gradeflation without first understanding how many of those are NOT net new grades. This is an old story with moderns, and why I stay away.
There are investors and dealers alike who buy coins at shows or online to submit for higher grade. These folks believe somewhere in the equation of grading costs they will come out ahead. Others have lost in this game, and given up this practice.
Crack outs and resubmissions are surly not the only reasons pop reports increase. Price points can rise making previously low value coins worth it to send in. I see coins coming out of accumulations that haven't seen the light of day since the 60s. New discoveries all the time. Sure, fresh material doesn't shake loose on the convention scene to the point that it can support those dealers, so retreading old stock is an option, but that's just not the whole picture.
Any coin that is near a pop top or in condition census I have been very careful to ensure all previous grading events were removed. In one case I had a finest known by 3 points that could have shown up as 3 appearances (PCGS 66, NGC 66, NGC 67) and ruined everything. It still shows a single appearance. Some of the whack and crack boyz wouldn't have been so careful. That coin recently went in a for a 4th time over a 30 year period....now PCGS MS67 CAC.
I have no problem with the state of the current pop reports. They are quite usable. For choice and gem type coins, they are quite useful is comparing one series and grade to any other. It's the comparison that counts, not the raw number. If you want a better number, divide them by 2. For dated REG set pieces, I would assume the leading players know what the top 5-10 pieces are in any series regardless what the pops might say. Are these pieces are well tracked among those top collectors and dealers. If you have the next grade down where say 100 pieces exist, it really doesn't matter if it's 50, 100, or 200. There probably aren't that many date collectors for that grade.
Example: The 1887 PCGS MS67 Morgan pop 62 I bought back in 2010. There was a lone 68 back then. Today it's pop 138 in MS67, 7 in MS67+, and still a lone MS68. For the big dog sets only those top 8 coins really matter. The other 138 coins are not under crazy demand. Did I lose money on paper with that pop double? Probably. At least the coin CAC'd after I bought it making it 1 of 48. Even that CAC number has doubled up. The coin is nice enough where it could eventually become one of those 67+.....which would be only way to keep up with the Joneses. It is certainly not average for the grade. I bought the coin from a smaller dealer who had bought 8 rolls out of an original bag. Only 1 coin made a 67, this one. So are there 2X as many collectors out there for this 2X increase in 1887 Morgan MS67 pops? Nope. There may not even be as many collectors for it as there were in 2010. But if there are 20-30 top set collectors, they will want to dig into some of those MS67 CAC coins.
As more and more raw coins are graded, one should expect the pops to increase... especially in moderns. Gradeflation is definitely not the sole reason for increases.