Video: Guth (PCGS) about the Non-US Grading Market

[chrisild]

Will be interesting to see whether this can fly here.

Dave Harper (World Coin News) interviews Ron Guth (PCGS) at this year's World Money Fair:
http://www.youtube.com/watch?v=s7WI7qBiHq8

Grading (as in third party graders) and slabs are certainly not common in Europe. But apparently more and more collectors want prestigious packaging, certificates, etc. for what they buy. Who knows what the future will bring ...

Christian

[Figleaf]

I advise American companies who want to get into European markets for a living. This guy is not going to make it. He makes all the classic mistakes. He assumes automatically that the market has been waiting for him, he believes everything that happened in the US will also come to pass across the Ocean, just much later, but most of all, he doesn't have a product. He sells hot air. He believes his gradings give collectors certainty. He thinks dealers will sell more coins when they're slabbed. I think his amazing naivety will make him go the way of Wal-mart.

This is actually good. What he calls "professional grading" hinges on two false premises: people can't grade and grade is important. I have taught many people how to grade. All it takes is a heap of the same coins in all grades and half an hour. Also, grades are important in only two circumstances: when you buy coins as an investment and when the buyer cannot physically hold the coin. Those who collect as an investment are fools. They deserve slabs. There is enough evidence to show that investing in coins is extremely risky and that the risk you are taking is not rewarded. Coin collecting is an investment in yourself. It teaches you history, arts, metallurgy, archeology. It allows you to hold antiquities and old objects of daily use.

If the buyer can see the coin, grading is useless. Buyer and seller must agree on price, not on grade. Example: I never pay more than unc for bu. I don't have to go around arguing with anyone to do this. I just say no to coins I find too expensive. You've probably done this all your life, without a thought of grading.

"Professional grading" is also guilty of grade inflation. It makes sense to offer the same coin several times to a "professional grader" until you get a slightly higher grade. Since all smart people are doing this, the end result is that slabbed coins are more and more certain to be overgraded. This influences the "professional grader", who will more easily overgrade a coin, until the overgrading has become the norm (it's called "market grading" in the US - I am not kidding you) and a new round of grade inflation can start.

In that sense, and in the sense that "professional graders" encourage you to lose faith in your own capacities and to look at your collection as an investment, the "professional slabber" is detrimental to the hobby.

Peter

[chrisild]

Thanks for the insight; I take it PCGS has not been among your customers so far.   Basically I agree; what I am not sure about is the impact that the Internet has or, with regard to slabbing here, may have. As you wrote, "If the buyer can see the coin, grading is useless." Coin dealers who sell a lot (or maybe only) online may be tempted to promote it though: Hello customer, you don't have to rely on a photo because SuperGradingService says it's (a) authentic and (b) in this and that grade ...

The big question is, would European buyers "buy" this concept? Or would most say, thanks, I rather buy my expensive coins at a place where I can see the piece (or from a dealer who lets me return it)? Sure, Wal-Mart failed, but Starbucks is still around and doing fairly well here.

Christian

[Figleaf]

To begin with, I don't see people adopting the North American grading system. We have poor, fair, good, very good, fine, very fine, extremely fine and uncirculted, eight grades. From fine one, you can plusses, minuses and split grades, adding f+, f-vf. vf-, vf+, vf-ef, ef-, ef+ ef-unc and au, a total of 17 grades give or take a few.

The US system uses 70 grades, 11 of which are less than fine, 26 between fine and ef, 25 between ef and unc and 5 of which are better than unc. There are ten grades alone between au and unc. What strikes you immediately is that the whole system is geared towards the very high grades and that you can have a coin that is better than mintstate (the grade at which the coin left the mint). It is highly obvious that the system was designed to accomodate grade inflation and large dealers.

When you apply the system to pre-decimal, hammered and classic coins it becomes completely unusable. The elements that have the largest influence on the price of e.g. an Indian coin are whether the date and the mint are on the flan. A Roman coin in au is a ridiculous concept. You can argue, that the system could be applied to modern, machine-struck non North American coins, though.

Coins don't wear in stages, but continuously. To describe wear in a small number of stages is therefore an abstraction, but in an infinite continuum, 70 grades is also a small number. The question is, what size of step is still distinguishable to the human eye. On other boards, people sometimes make a game of this. They post their coin and let others guess what grade the "professional grader" attached. The results are revealing. Most guesses are in a band with the extremes about one step apart (US grades translated into classic grades), a large majority is half a step apart. This means:

a) the classic system is sufficient to let most buyers and sellers come to a quick agreement, which is what it's meant for and it explains its survival.
b) more steps do not give more certainty but more grounds for disagreement, leading to doubt about one's capacity to grade and "professional graders"
c) the grade of a coin is in the eye of the beholder. It's not science, it's psychology.

Especially the last point shows clearly that the "professional graders" are only selling the trust you have in them. All the while, their "service" leads to grade inflation, so that your trust is by definition misplaced.

Peter

[Prosit]

First, I have to say I am no proponent of grading companies and after collecting coins for many years may have acquired fewer than 5 graded coins that remain in slabs.

Second, having collected US coins prior to grading companies I have to say that grade inflation existed prior to their existence.  If condition makes a difference in price and it does in all collectibles markets, then you will have constant pressure from sellers pushing the edges of whatever grading standards exist and they did and still do.

Third, Unc and MS is not the same creature at all.

Call me foolish  but I spent some time searching for a Churchill Crown that had no contact marks.  Never found it but I do have two that are better than average.  If I had found one would I have paid more than most pay for that very common coin? Yes.  That simple willingness to pay more for better condition is what drives splitting grades in coins and always has and when there are enough people searching for those coins price goes up.

That is what allowed grading companies to enter the scene (IMO)...more people searching for better coins and being willing to pay for them consequently grade becoming more important to collectors due to those price differences.   Another factor necessary for grading companies to thrive is market acceptance.  The entrance of investors into the US coin market only hastened their acceptance. However market acceptance can be generated, might take 25 years but they are persistent buggers.

So will grading companies come to the continent?  Eventually.  Is that a good thing?  I don't think so.

I have an Austrian coin in a PCGS slab....what a ludicrous and pitiful looking little coin. 
oh Let me see if I can find it...

Dale

[Figleaf]

Good points, Dale. Yes, grade inflation exists, whether you have "professional graders" or not, but I don't think that this is a good reason to induce more.

I also agree that US collectors are looking for higher graded US coins, which is their right, of course. First, it is important to remember that US collectors will collect sets, series of a denomination by date, not a popular collecting method in the rest of the world (exception: euro collectors, see below). If they like that, fine, why not? However, those who collect by type will want by far less current coins, which is where slabbing may work best. Second, I think that this is not a trend in the rest of the world. Most of the coins on this forum are below ef (and still great looking IMHO). Sure, higher grade is better than lower grade, but not at all cost.

I do observe the trend to go for grade among euro collectors. To a large degree that is understandable. The best is obtainable, as mints will pack BU sets, avoiding bag marks. Modern production methods make circulation coins look great as they leave the mint. I don't think euro collectors are dominating numismatics, though. I see it more as a hype, following the introduction of the new currency that is slowly leaving casual collectors behind and giving rise to experts in a completely new field. The upshot is that the experts won't need slabs, because they know perfectly well how to handle coins, the casuals, slowly losing interest won't put any money in them and that leaves a group in the middle. Important, because it is a source of new collectors, but not determining the face of the hobby. Not a "market". Nevertheless, looking over my argument, yes, maybe euro collectors will be willing to plunk down money for slabs and other people grading for them...

Your Austrian slab (wonderfully weird pic, Dale. I love it) is a great example of irrational financial thinking. I don't know what the fees of the graders are, but I am pretty sure that postage and grading fees bear no relation to how much more could be asked for this coin because it was slabbed.

Peter

[Prosit]

This coin got an MS-62.  Do I agree with that?  ......I don't know if I do or not.... after collecting Austrian for about 9 years, not an expert but familiar with those coins...I suspect that it is a proof that got stored poorly or maybe more likely not proof but HG.  If it was a reg issue then I do tend agree with the grade, I just don't know but if it was a reg issue and I sold it I would say it is unc  and forget the MS or PR stuff.  I am fairly comfortable with continential grading.

So I tend to think they screwed this one up as they are wont to do upon ocassion  

Was the coin worth the slabbing fee?  No it isn't even worth the postage   
On a good day worth maybe a half a euro (they should make half-euro coins btw instead of 50 eurocent coins but that is another subject) 

I suspect this coin was slabbed as one of those promotional freebees.

I paid nothing for it, it was sent to me by someone who thought I would like it and they were right, despite the slab.

Dale
PS I was wrong it is a ANACS slab

[Juno Moneta]

I do think the US garding system in general, and the trend toward encapsulation, is a product of the American tendency to over-commercialize everything. Unlike the joy derived from holding and closely examining a coin, a slab is 'cold' and I tend to just put them away for storage. Mail order must have been a major factor in the advent of slabs. A buyer was supposed to gain confidence in buying sight unseen. I have purchased slabbed coins that may have had the grade but the eye-appeal was lacking. Thankfully, photography (especially digital) has become faster and easier. The Internet makes photo distribution a charm. It's been interesting to watch these recent trends and the effects it's had on dealers and the collecting hobby. Here slabbing is a detriment because photo quality is more difficult with an encapsulated piece.

I was glad to read of the 'promotional' slabbing going on. I've seen many coins not worth the cost and wondered how they are sold for BELOW the cost of the slab. Often there is no premium on coins sold in a slab and you wonder how long the trend can last.

Slabbing is useful for treating coins as investment commodities. The do help preserve rarities from the ravages of the elements and the fingers of the uninitiated. To enjoy them again - you can always CRACK 'EM OUT!

JM

[Prosit]

Speaking of slabbing coins....I created this page once upon a time 

http://www.austriancoins.com/slab

Dale

[Austrokiwi]

I just caught up with this thread. I have a n American Colleague who swears by slabbing.  I have one major problem with slabbing: Thalers/Talers  Especially the "Austrian" ones are often identified and authenticated by their edge markings, I was trying for a slabbed Bombay Mint MTT on ebay last week. I didn't win the Auction but if I had that coin was coming out of the slab!!!!!

[Figleaf]

We've seen slab imitations, destroying the "guarantee" the slabs give (illusionary in the first place, I think), but now comes a grader's grader, pretending to be able to tell "investors" in how far they can trust what's on the slab (if it's real). The wole scheme is taking the shape of a pyramid. Kafka would have loved it...

Peter