The Answer is to Modify the Price Guides, Not to Change the Grading Scale or Standards
IGWT
Posts: 4,975 ✭
The dramatic price jump that often accompanies a one-point difference in grade is a problem that needs solving. The potential gain from an upgrade promotes crackouts and contributes to grade inflation. Proposed solutions have focused mostly on altering the grading scale -- whether by grading in 1/10 increments or by moving to 100 points -- in recognition of the fact that not all coins of the same grade are equal. Those solutions wouldn’t work, however, even if it were possible to overcome the hobby’s investment in the 70-point scale. They simply call for way more accuracy in grading than we can reasonably expect. (I’d argue that an 11-point MS scale already calls for more accuracy than a good grader can muster.)
Let’s say that a collector purchases a raw coin at auction as a PQ 64 for $1,000. The PCGS price guide reports that this issue trades at $400 in 64 and at $2,600 in 65. Now, if PCGS were to grade the coin a 65, has it increased in value by $1,600? Or, if PCGS were to grade the coin a 64, has the coin decreased in value by $600? Unfortunately, for practical purposes, the answer to both those questions is “yes” because the price guides report a specific price for each grade. The end result will be either failed attempts at an upgrade or a coin in a coffin that contributes to grade inflation.
It seems to me that a solution to crackouts and grade inflation is found in looking at the way that the price guides associate prices with grades. All retail guides report one price per grade for each issue (and the bid-ask spread in the Greysheet also treats equally all coins of the same grade). Wouldn’t it be better if prices guides reported a range of prices for a particular grade to account for the fact that coins of the same grade carry different values? Taking the PQ 64 as an example, perhaps the price guides should indicate that 64s sell for $400-$1,100 and 65s sell for $1,000-$2,600. Price guides that reflect a range of quality within a given grade would substantially decrease the powerful incentive to always seek the next higher grade.
Let’s say that a collector purchases a raw coin at auction as a PQ 64 for $1,000. The PCGS price guide reports that this issue trades at $400 in 64 and at $2,600 in 65. Now, if PCGS were to grade the coin a 65, has it increased in value by $1,600? Or, if PCGS were to grade the coin a 64, has the coin decreased in value by $600? Unfortunately, for practical purposes, the answer to both those questions is “yes” because the price guides report a specific price for each grade. The end result will be either failed attempts at an upgrade or a coin in a coffin that contributes to grade inflation.
It seems to me that a solution to crackouts and grade inflation is found in looking at the way that the price guides associate prices with grades. All retail guides report one price per grade for each issue (and the bid-ask spread in the Greysheet also treats equally all coins of the same grade). Wouldn’t it be better if prices guides reported a range of prices for a particular grade to account for the fact that coins of the same grade carry different values? Taking the PQ 64 as an example, perhaps the price guides should indicate that 64s sell for $400-$1,100 and 65s sell for $1,000-$2,600. Price guides that reflect a range of quality within a given grade would substantially decrease the powerful incentive to always seek the next higher grade.
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would again present more uncertainty into the market place.
Every coin would be sold as PQ at the upper end of the range.
Perhaps coins that are PQ could be graded as 64.5 or 64+, at a price
listed commenserate, with the scarcity and value of the mid grade.
This would narrow the enormous gaps in price and give a more accurate
printed value for what is happening in the market place.
Camelot
<< <i>I agree that this is an excellent idea and actually reflects the reality of what people already do. One potential, troublesome pitfall is that it will be a half-step backwards toward the raw days in that when you buy your 64, the tendency will be for the seller will claim that it is PQ and deserving a price in the upper part of the range. When you got to sell the coin, the dog will now be considered low-end and sell for a price in the lower part of the range. It's human nature, and it's hard to fight it. >>
We'd [*gasp*] have to learn how to grade!
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<< <i>I agree that this is an excellent idea and actually reflects the reality of what people already do. One potential, troublesome pitfall is that it will be a half-step backwards toward the raw days in that when you buy your 64, the tendency will be for the seller will claim that it is PQ and deserving a price in the upper part of the range. When you got to sell the coin, the dog will now be considered low-end and sell for a price in the lower part of the range. It's human nature, and it's hard to fight it. >>
We'd [*gasp*] have to learn how to grade!
That would put us in the exact same place we are right now.
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<< <i>I agree that this is an excellent idea and actually reflects the reality of what people already do. One potential, troublesome pitfall is that it will be a half-step backwards toward the raw days in that when you buy your 64, the tendency will be for the seller will claim that it is PQ and deserving a price in the upper part of the range. When you got to sell the coin, the dog will now be considered low-end and sell for a price in the lower part of the range. It's human nature, and it's hard to fight it. >>
We'd [*gasp*] have to learn how to grade!
That would put us in the exact same place we are right now.
Exactly! This thread makes me remember certain sellers to whom every coin they own is PQ!
An authorized PCGS dealer, and a contributor to the Red Book.
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<< <i>I agree that this is an excellent idea and actually reflects the reality of what people already do. One potential, troublesome pitfall is that it will be a half-step backwards toward the raw days in that when you buy your 64, the tendency will be for the seller will claim that it is PQ and deserving a price in the upper part of the range. When you got to sell the coin, the dog will now be considered low-end and sell for a price in the lower part of the range. It's human nature, and it's hard to fight it. >>
We'd [*gasp*] have to learn how to grade!
That would put us in the exact same place we are right now.
I disagree. Right now, every aspect of published pricing reinforces the point theory - that every coin of the same grade is worth the same. Publishing ranges would reinforce the continuum theory - that there are varying levels of quality within the grade.
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<< <i>I agree that this is an excellent idea and actually reflects the reality of what people already do. One potential, troublesome pitfall is that it will be a half-step backwards toward the raw days in that when you buy your 64, the tendency will be for the seller will claim that it is PQ and deserving a price in the upper part of the range. When you got to sell the coin, the dog will now be considered low-end and sell for a price in the lower part of the range. It's human nature, and it's hard to fight it. >>
We'd [*gasp*] have to learn how to grade!
That would put us in the exact same place we are right now.
I disagree. Right now, every aspect of published pricing reinforces the point theory - that every coin of the same grade is worth the same. Publishing ranges would reinforce the continuum theory - that there are varying levels of quality within the grade. >>
I agree with your point completely. The cynic (realist?) in me sees this as another tool for the omniscient dealer to take advantage of the poor, hapless collector.
Price the coin, not the slab.
Hasn't it always been that way?
What is the slab good for?
A third party opinion.
Buyer and seller beware, and the 'market' makes its own adjustments.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
A Third Party Appraising service (TPA): a company that is expert in assessing coins' condition and their value in the marketplace. They could publish regular reports, so that as the value of the coin goes up and down, you can track the value of your coin (without having to resubmit it). This sounds pretty complicated; let me work on that idea.
A Third Party Ranking service (TPR): this service would probably have to be provided by, or with the input of, and independent expert of the series. Coins that are really common (ie. 1844-O half eagles) would probably not be worth submitting, unless they were clearly among the finest known. However, it would be neat to know that your 1858 $10 was approximately the seventh best (or a range like between the fifth and tenth best) of the 42 pieces known. Or, your 1844-O $5 ranks in the second decile of the 400 known. Again, this might not be practical on a large scale, but a service that might be of interest to some.
nice neat price range either. Some people will see poorly made coins as dogs and some will see
poor surfaces as dogs. Saying a coin that is gem in all ways except for lousy surfaces has a $400
to $2600 price range won't do anyone any good.
Why not call it what it is, a 65/ 65/ 62? Until people get used to whatever system emerges the
graders could still give it an overall grade and owners could look this up in the price guides. Be-
fore long the price guides would adapt to reflect the value for each attribute.
Why modify the price guides when it's grading that's broken and the proposed modification is no
simpler and provides collectors with no more information than the current system.
The TPG's can still be beholden to the overall grade during the transition. Switching to 100 points
is completely a non-issue. It really doesn't matter one whit if we use 60 to 70 for grading uncs or
only the even numbers from 80 to 100.
and it sets us apart from practitioners and consultants. Gregor
again, using your example of MS64/$400 and MS65/$2600, i always assume that a typical MS64 should be priced somewhere below that $400 amount through a price below the $2600 amount. the prices in a guide don't tell me that every MS64 sold at $400 and every MS65 sold at $2600, the prices just give me an average to work with, adjusting things according to where a coin grades in my mind and where the dealer agrees is reasonable.
as long as collectors continue to scramble with each other and willingly pay multiples of sheet for only slightly better than average coins, the dealers won't cooperate with us and prices won't lower, the whole mess won't return to sanity. if a coin is average, pay the listed sheet price or very, very close to it. if the coin is better or worse than average, adjust your offer either up or down accordingly.
it isn't the sheets fault that things are the way they are, it's the buyers fault and the sellers are only more than willing to follow their lead.
<< <i>I think each of us has to not only learn to grade any series we seriously collect, but to also learn what the coins are worth, develop personal taste within the series, and decide when it's smart to overpay and when it's smart to pass. We have to be personally responsible for the range of values. JMO >>
There's a lot of truth and wisdom here.
But it would be nice to be able to look in the guides and be able to see
what other collectors are thinking. While operating in a vacuum works
as one comes to learn the hobby, why shouldn't newbies be able to un-
derstand valuations as well? Why shouldn't shoppers be able to look at
a list of coins and have a better idea of which suit his needs?
Try selling a PQ coin in a 64 holder for $1,000 when the PCGS price guide says $400. The only dealer who'll pay that much is the one who thinks he can get an upgrade to 65 and sell at $2,600 -- the result that we're looking to avoid. And I'm not blaming dealers. Any dealer who tries to sell a 64 for that kind of premium will probably be labelled a scammer. Recognizing and publishing a continuum of value within a grade will facilitate trade between the extremes.
Buy the coin not the slab. Price the coin, not the slab. Hasn't it always been that way? What is the slab good for? A third party opinion.
Like it or not, for better and for worse, the market is driven in large part by those third-party opinions. Let's at least acknowledge that an opinion on grade covers a range of values.
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Try selling a PQ coin in a 64 holder for $1,000 when the PCGS price guide says $400. The only dealer who'll pay that much is the one who thinks he can get an upgrade to 65 and sell at $2,600 -- the result that we're looking to avoid. And I'm not blaming dealers. Any dealer who tries to sell a 64 for that kind of premium will probably be labelled a scammer. Recognizing and publishing a continuum of value within a grade will facilitate trade between the extremes.
. >>
Exactly. But if the coin is really a nice 63/ 64/ 66 you could look up the grade in a guide and see it's worth $1000.
It would take time to develop the guides. So what?
They'd never be perfect either but they cut down on resubmissions. In the mean time many coins would go
in for regrading keeping the graders happy. It should be a win/ win for all involved.
The only bad point is it will be harder to read a price guide but it will be a damn sight easier than learning to
grade and value a series.
<< <i>When a dealer owns the coin it will be PQ. When the collector owns the coin it will be considered overgraded.
Try selling a PQ coin in a 64 holder for $1,000 when the PCGS price guide says $400. The only dealer who'll pay that much is the one who thinks he can get an upgrade to 65 and sell at $2,600 -- the result that we're looking to avoid. And I'm not blaming dealers. Any dealer who tries to sell a 64 for that kind of premium will probably be labelled a scammer. Recognizing and publishing a continuum of value within a grade will facilitate trade between the extremes.
Buy the coin not the slab. Price the coin, not the slab. Hasn't it always been that way? What is the slab good for? A third party opinion.
Like it or not, for better and for worse, the market is driven in large part by those third-party opinions. Let's at least acknowledge that an opinion on grade covers a range of values. >>
Absolutely, an opinion in grade covers a range in values.
That is why we do not need another price guide to reflect that. The "market" already does.
When you go to buy or sell a coin, theoretically, an adjustment to any published price will be made between the parties in the transaction.
This is already happening in the marketplace.
And it doen't matter if one is trying to get an upgrade shot or if the coin has remained in a first generation holder.
Now if one is pinning their hopes on what the slab says and not the coin ( whether the seller or the buyer) then it will inevitably be a lesson learned not to do so as has been discussed many times before.
So when we start talking about amplified price guides, I think it is aimed at protecting those who buy the slab not the coin, IMO.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
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So when we start talking about amplified price guides, I think it is aimed at protecting those who buy the slab not the coin, IMO. >>
I should think it's aimed at grading coins rather than using a pricing system that doesn't work.
roadrunner
<< <i>...Let’s say that a collector purchases a raw coin at auction as a PQ 64 for $1,000. The PCGS price guide reports that this issue trades at $400 in 64 and at $2,600 in 65. Now, if PCGS were to grade the coin a 65, has it increased in value by $1,600? Or, if PCGS were to grade the coin a 64, has the coin decreased in value by $600? Unfortunately, for practical purposes, the answer to both those questions is “yes” because the price guides report a specific price for each grade. The end result will be either failed attempts at an upgrade or a coin in a coffin that contributes to grade inflation... >>
This is an interesting thread. But the price guides are only guides. Read WHAT DO PCGS PRICES MEAN?
The collector paid $600 above the PQ 64 average price. So the "value" to the collector for this coin is $1000. To me the true price range of the coin would be a low price that is higher than the average price for PQ 63 ranging up to a maximum that is lower than the average price for a PQ 65.
The collector who bought the raw PQ 64 at auction felt that the coins was worth $1000 and was willing to pay that much for it.
Grading is personal and subjective. Collectors and dealers will continue to look for the magical arbitrage and the crack-out game will continue. Some coins will grade higher, some will grade lower, a few will BB, but many others will grade the same. Participating in the crack-out game is a risk borne by the submitter. It's still an imperfect world.
Edited for spelling - Hey CU when do we get a spellchecker?
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<< <i>...Let’s say that a collector purchases a raw coin at auction as a PQ 64 for $1,000. The PCGS price guide reports that this issue trades at $400 in 64 and at $2,600 in 65. Now, if PCGS were to grade the coin a 65, has it increased in value by $1,600? Or, if PCGS were to grade the coin a 64, has the coin decreased in value by $600? Unfortunately, for practical purposes, the answer to both those questions is “yes” because the price guides report a specific price for each grade. The end result will be either failed attempts at an upgrade or a coin in a coffin that contributes to grade inflation... >>
This is an interesting thread. But the price guides are only guides. Read WHAT DO PCGS PRICES MEAN?
The collector paid $600 above the PQ 64 average price. So the "value" to the collector for this coin is $1000. To me the true price range of the coin would be a low price that is higher than the average price for PQ 63 ranging up to a maximum that is lower than the average price for a PQ 65.
The collector who bought the raw PQ 64 at auction felt that the coins was worth $1000 and was willing to pay that much for it.
Grading is personal and subjective. Collectors and dealers will continue to look for the magical arbitrage and the crack-out game will continue. Some coins will grade higher, some will grade lower, a few will BB, but many others will grade the same. Participating in the crack-out game is a risk borne by the submitter. It's still an imperfect world.
Edited for spelling - Hey CU when do we get a spellchecker? >>
I agree.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
Good point CK.
and it sets us apart from practitioners and consultants. Gregor
We don't need to change the price guides or the grading standards. Learn to grade what you collect, and understand that premium coins will cost premium prices. With the auction houses posting prices realized, and with the various price guides available, figure what you'd pay for a coin, or how much you would stretch for a premium specimen to fill a hole in your collection. Basically create a 'price guide' of your own.
A new price guide would have several inherent flaws. One man's beautifully toned Morgan, could be ugly to another. One collector may like 'white' type another want a more original look. How could one price guide differentiate?
Dan
The old saw about ownership adding a point will take on a new meaning.
It is an interesting idea, but the bottom line is that it adds mostly confusion to a hobby that is already very difficult. For the new collector, it will add a variety of ways they can be taken to the cleaners. For the veteran that knows coins, it adds very little. Veterans already often bid up a nice coin at true auction to close to the price for the next grade up. Sometimes it is wishing bidding.