Grading Guarantee - Something I've never understood

MWallace · February 19, 2006 11:49PM

I often hear it speculated here and elsewhere that TPGs such as PCGS and NGC that have grading guarantees will grade a coin a point or two higher for their "dealer/collector buddies". What I don't understand is why would thay do that? If the coin is later sold, and then returned for a regrade by the new owner, and regraded properly, wouldn't it then cost the TPG money? If so, why would they add a point or two for ANYONE when it could potentially cost them money. It makes no sense to me,,,,, or what am I missing?

coinguy1 · February 20, 2006 12:02AM

<< If the coin is later sold, and then returned for a regrade by the new owner, and regraded properly, wouldn't it then cost the TPG money? >>

Without commenting on the "will grade a coin a point or two higher for their dealer/collector buddies" part of the post, I will say this: Under their grading guarantee policies, the grading companies, themselves, get to determine whether the coins have been over-graded. So, hypothetically, they could leave unchanged, the grades for any such coins, and it wouldn't cost them any money.

VamGuy · February 20, 2006 12:05AM

<< ...the grading companies, themselves, get to determine whether the coins have been over-graded. So, hypothetically, they could leave unchanged, the grades for any such coins, and it wouldn't cost them any money. >>

Not only will it not cost the TPG any money, you'll actually be paying them to regrade it the same.

ziggy29 · February 20, 2006 12:07AM

<< Not only will it not cost the TPG any money, you'll actually be paying them to regrade it the same. >>

True -- but the TPGs have to weigh the cost of "eating their mistakes" with the cost of reduced confidence in their product should they choose NOT to eat them.

MWallace · February 20, 2006 12:08AM

My understanding is that the original grade is covered and kept from the graders. If true, then they can't regrade at same grade just to save them money. If not true, then ALL integrity is lost.

Comments?

ziggy29 · February 20, 2006 12:16AM

<< My understanding is that the original grade is covered and kept from the graders. If true, then they can't regrade at same grade just to save them money. If not true, then ALL integrity is lost.

Comments? >>

It would be really cool if there was a way to hide date and mintmark from the graders. I suspect you'd either see tightening up across the board, or else the pops for condition rarities would explode. Anyone who has ever submitted very nice, condition rarity Morgans or early branch mint gold could probably relate.

coinguy1 · February 20, 2006 12:18AM

<< My understanding is that the original grade is covered and kept from the graders >>

I am not certain, but don't think that is corect for coins whch are submitted for down-grade.

<< Not only will it not cost the TPG any money, you'll actually be paying them to regrade it the same. >>.

True -- but the TPGs have to weigh the cost of "eating their mistakes" with the cost of reduced confidence in their product should they choose NOT to eat them

Good point, Ziggy29. In fact, that is the reason I had originally written "So, hypothetically, they could leave unchanged, the grades for any such coins, and it wouldn't cost them any money" instead of using the word "anything" in place of "any money".

TwoSides2aCoin · February 20, 2006 12:18AM

Good question MWallace and I would like to put myself personally in the shoes of David Hall or any owner of a TPG or for that matter, any businessman who offers some type of warranty or guarantee on their products/services.

Think about it guys (and gals).... If I owned a TPG and I "guranantee" that a coin grades at a STANDARD that was drawn up to be TRUTHFUL and FAIR, .... What I am saying is this : " I stand by the grade that the coin receives and I stand behind the graders I have hired to grade that coin".

In a perfect world, nobody makes a mistake and everything is perfect.
In a not so perfect world, business owners sometimes take it in the shorts by trusting someone else to do their work. We still have to stand behind our word.

I hope that offers a simple view of my understanding of the "guarantee".

Steve · February 20, 2006 1:05AM

The guarantee is subjective, just like the grading of the coin. The price a buyer pays for a coin in any grade is subjective to what the buyer believes that the coin is worth TO HIM. It amazes me how we all try to make this grading or valuing thing as an objective exercise. It just doesn't work that way. Some of us buy and sell coins "to make money". If that is the case, there is a natural desire to see the coins be bought at the lowest cost and sold at the highest cost. The grade we "think" should be assigned corresponds to whether we want to buy the coin or we already own the coin. Some of us buy and sell coins primarily to collect a series or common group or a rare or unusual coin. There, we may be willing to pay a higher price than so called retail value because to us, the coin is worth more. JMHO. Steve

BAJJERFAN · February 20, 2006 1:20AM

<< True -- but the TPGs have to weigh the cost of "eating their mistakes" with the cost of reduced confidence in their product should they choose NOT to eat them. >>

Yep; sooner or later that "thing" will end up in the hands of someone who knows what he has; NUFF SED!!

coppercoins · February 20, 2006 1:33AM

Put simply, it's a marketing gimmick. Any coin that is overgraded in the holder can be subject to downgrade and the "mechanical error" caveat comes in to play, which completely washes away their guarantee. A "mechanical error" is a label that ended up with the wrong grade on it because the machine was malfunctioning. Oddly enough that's what happened almost all the time - guaranteed.

Works a lot like their other gimmick, the timeliness of their service. They guarantee in and out service in so many days, but can black out any number of days they wish for whatever reason, hypothetically making a 30 day promise turn into 90 actual days or more. It's beyond me why they cannot simply promise their returns in so many calendar days excluding weekends and holidays and leave it at that - regardless of what that number is. It would make them look better in the long run if they didn't black out all the show dates, days the grader's dog was sick, etc. and just run an honest calendar days service.

coinguy1 · February 20, 2006 1:56AM

<< A "mechanical error" is a label that ended up with the wrong grade on it because the machine was malfunctioning. Oddly enough that's what happened almost all the time - guaranteed. >>

You will lose on that guarantee of yours.

I have seen, heard of and am certain, that there are far more cases where PCGS and NGC have honored their grading guarantees than those in which they have used the "mechanical error" excuse. It's just that in many instances, the latter situation is far more likely to receive a lot of publicity.

Grading Guarantee - Something I've never understood

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