The theory of Third Party Grading Services

[EZ_E]

As we all know, grading is largely subjective, yet it is based upon concrete observations.

 

Ideally, a grader should be consistent over time, i.e. the same coin should be graded the same whether it was last week, today or next month.

 

Even the most experienced grader cannot bat a thousand. To err is human. Hey, we can't argue that point. So, how can TPG offer a guarantee (a promise or an assurance that attests to the quality or duability of a product or service)?

 

An experienced grader is usually right on the money about 85% of the time. Still, that leaves a 15% marging for error. Ok then, put another grader in the formula and now you get a 90% accuracy rate. Add a third grader in the pot and now we approach a 99% rate of accuracy. Of course, the more graders who must agree then the greater the accuracy.

 

The "crack out game" is proof-positive that the system does not always work. It would be interesting to see the statistics of "mis-graded" coins among the leading grading svc's. Most assuredly the figures would be low. However, what margin of error is acceptable? A brain surgeon has a zero percent margin of error or else the caca will hit the fan. Sure, grading isn't brain surgery but it is a professional service which the hobby confides in. Considering all, I feel that a margin of error of less than or equal to one percent would be acceptable even though such an error could cost a collector hundreds or even thousands of dollars.

 

That is why a collector should be reasonably comfortable with their own grading skills and general numismatic knowledge. Ignorance will criple a collector faster than a Texas tornado. This is why I personally am going to register for a three day coin grading seminar offered by the ANA next month.

 

So, the formula for success? Expert graders + excellent customer care + aesthetic encapsulation + a no mickey-mouse guarantee = #1 service

 

 

[gmarguli]

An experienced grader is usually right on the money about 85% of the time. Still, that leaves a 15% marging for error. Ok then, put another grader in the formula and now you get a 90% accuracy rate. Add a third grader in the pot and now we approach a 99% rate of accuracy. Of course, the more graders who must agree then the greater the accuracy.

 

You sound just like David Hall when he used to give the speeches at the shows back when PCGS was just starting.

 

According to DH the accuracy rate they expect from their graders is 70%. I thought that was shockingly low. If I only hit 70% on the coins I submit I'd be out of this business extremely quick. However, in fairness to them I don't have to know 100 different series. I had heard it used to be 85% years ago.

 

One of the problems with what you are suggesting is when that 3rd grader only looks at the slab for a quick second and only makes a change if there is a major error. The 3rd grader grades the coin PF65, but the slab says PF64. Is he likely going to change that grade? Is the coin a misgrade? A $30 coin is graded MS68 when the 3rd grader thinks MS67 (a $25 coin) should be the real grade. Are they going to do something about it? A lot of misgrades likely go thru as OK because it is in the interest of the grading service to let it slip thru or it is too small to matter.

 

Now that 2nd grader. All he does is validate the 1st graders opinion. I once heard that about 15% of the coins get a different grade than what the 1st grader gives it. Now, if you're looking for 70% accuracy and only 15% of the coin grades are changed, then there is potentially 15% of coins going thru the service that aren't graded properly.

[coinman1794]

The "crack out game" is proof-positive that the system does not always work. It would be interesting to see the statistics of "mis-graded" coins among the leading grading svc's.

 

It can be argued that this is more a problem with the grading scale system, itself, rather than with the services. The grading scale doesn;t accounbt for PQ coins that could grade either way at the services. More specifically, some coins can be perfectly legitimate as MS64 and MS65 at the same time. If a coin is right on the line, how can one make the distinction between the two grades, and, is there a distinction with our current system? Therefore, the crackout game isn't necessarily purely a result of grading service error (although it certainly is a factor), but rather, it more clearly shows that the current grading scale is too ambiguous to prevent multiple interpretations of grade on PQ coins.

[DonHeath]

Personally, I see absolutely nothing wrong with the current grading approach at NGC. I see their grading opinion as quite valid, but the market's valuations based on TPG opinion as flawed. A market that will support 10x premium for a single grade point knowing the imprecision and subjectivity of the current system says far more about the competitive nature of the market than it does the grading services accuracy and methodology.

[michael]

grading is not largely subjective

 

IT IS subjective

 

 

everyone can do it and lots do as good a job

maybe? better than some others/the for profit services that are making huge money grading coins

 

 

 

currently in this market for the most part given reasonable skill and knowledge anyone can basically grade

 

people are not sending in coins to be graded most who send in coins already know the grades and particiulars of the coin better than the services! ALL THEY ARE DOING BY SENDING IN THEIR COINS IS THEY WANT THE SERVICES TO PRICE THE COINS FOR THEM AS IN CERTAIN HOLDERS THE SAME COINS BRING MORE LOTS MORE HUGE AMOUNTS MORE THAN THE SAME COIN RAW OR IN OTHER HOLDERS just the way it is in this market as the majority want it this way and they show this by their pocketbook

 

 

 

now if someone has a private business and charges money for their opinion in reality they are actually no better or worse! than basically (most but not all) other reasonable seasoned collectors in grading

 

the MAJOR CRUX OF THE MATTER WHAT IS MOST IMPORTANT IS PERCEPTION OF AN OVERALL MAJORITY OF THE COIN MARKET

 

and currently in this coin market there is an entity run by human beings that in this market right now

 

many to most all accept as THE word on grading and the coin must be blessed for the coin to be liquid and to get the most for the coin has to be in this particiular holder with this particiular services opinion

 

this is not GOOD OR BAD OR RIGHT OR WRONG just the way most of the perception is in this market

 

and for the exact same coins in one particiular holder as compaired to other holders as perceoived by this market the coin sells for some to lots to a huge amount more! and that is okie just the way the current market is

 

that does not make the coins good or bad in fact some are great but there are also other great coins in other holder

 

just make sure you buy the coin not the holder and of course if the coin is in a specific holder well good all the better but always remember to buy the coin not the holder

 

 

michael

[michael]

also besides being subjective

 

when you charge for an opinion

and are in a businees for profit

and take the human factor

 

wow is there even more subjectivity

 

also for me to charge for coin opinions and then sell coins and then offer guarantees is for me almost impossible given the not only subjevtive coin market but human nature of the business

 

and factor in as coins are a hobby i have a hard time seeing how any true type of guarantee can work!

 

kind of like the weather man guaranteeing the weather for a week out and then if you make plans and the weather does not cooperate then you can ask for compensation

 

yes a guarantee for authenticity for a genuine original coin yes for grade and other designations no way!

 

and this has been proved as per the above time and time again when the services no matter which way they sugar coat it or get a fast talking high powered attorney with their legalese and points of law that are ironclad!? they quote very cleverly

 

bottom line

 

********** they still do not honor their guarantee********

 

point anf fact of law even if they are correct under the law they still do not honor their guarantee!

 

and this is not good or bad just the way it is if all the liabilities in holders where to come back to the companies offering opinions on coins and all would honor their so called guarantees they wopuld be bankrput within a week or less

 

how can you guarantee a grade that is as changable as the wind depending on a particiular day

 

the theory of third party grading?? yes it is a theory that can somewhat be put into practise but just cant offer iron clad 100% guarantees or fullfill the expectations of many in this current market

 

and if you think so then you are kidding yourself and of course just my opinion

 

do i like the services yes! but WHAT I LIKE EVEN MORE IS IF YOU BUY A COIN MAKE SURE YOU UNDERSTAND AND KNOW EXACTELY WHAT YOU ARE LOOKING AT AND BUY NO BRAINER GOOD COINS AND YOU LIKE THE COIN AND ITS PRICE/VALUE/WORTH TO YOU AND IT IS FOR FUN AS A HOBBY AND WITH DISCRETIONATY FUNDS THEN BUY THAT COIN! IF THE COIN IN IN ONE OF THE MAJOR CURRENTLY ACCEPTED HOLDERS ALL THE BETTER AND IF IN THE CURRENT NUMBER ONE MARKET ACCEPTED HOLDER ANOTYHER PLUS FOR YOU!

 

michael

 

 

 

 

[wolverine-migration]

3rd party offers a subjective opinion, less biased because it is a third party but still a subjective opinion. Coin grading is more accurate than comic grading but I think your 1 point scale is narrow. 68 vs 67 or 69 vs 70. How reproductible is it?

[Leothelion]

If coin grading is so accurate by the TGC then why is it when I compare many of my MS65, 66 and 67 certified coins, there is not a consistant, significant quality difference between the grades. I have and seen MS64 coins that look better then MS66 coins, MS65 coins better then 67 coins. But that's not to say I don't have a string of MS66 or 67 certified coins that match in quality. But that's from my own doing. Not by the TGC's. It's common sense to compare newly acquired coins to the coins in your collection. If the coin is inferior, doesn't match or hold the same quality in condition, color and luster then it doesn't make the collection and gets returned.

This is likely what happen with that unpredigreed Hibernia. The buyer took Jadecoin's doctored warning to the test, got suspicious, scared and checked the books.

 

Leo

[michael]

for me many do not know how to grade coins and even if they do there is always disagreements

 

and also there are just as many ms 65 66 67 graded coins that make it and/or exceed the grade

 

i guess for me you just have to look at a coin and deside for yourself and really it is not about the grade on a coin that is in dispute it is only one major thing

 

how much???

 

if you look at a coin no matter what you think it grades or the other person does even if you think it is massively overgraded undergraded cleaned counterfeit etc

 

you do not really care all you care about is what the person wants for it and if the numbers work then you buy the coin whatever the holder says

 

the coin will/should be around way longer than the plastic around it

 

i guess with many millions of coins graded and subjective statements there will always be many that see ms67 coins that in their minds eye are better than the coins they have in ms64 63 or whatever holders even raw

 

maybe maybe not

 

michael

 

 

 

 

[SilverEagleCoins]

In the 3 graders per review scenario, instead of each subsequent grader reviewing the previous graders rating, each grader should grade independently. The final score presented could then be some sort of average of the three.

[sanmary]

A few wise men have said "Use the grade on the holder as a starting point" "Purchase coins that you like" "Buy the book before the coin" etc.,etc.,...

I love TGC's for authenticity in some cases and of course for making coins in general more liquid should I decide to sell. Should one have blind faith in the label on a slab....no way. This is a lesson that all of us, I hope, eventually learn on our own. Hopefully the lesson isn't too expensive.

[michael]

[IGWT]

Michael -- What prompted you to resurrect this post? Very interesting reading. You used more words to express yourself 2 1/2 years ago than you do today.

[EZ_E]

What a surprise to see this! I posted it after I read a book by David Hall which I got from Michael. Of course, theory and the real world don't always mesh.

[Newmismatist]

For what it's worth, you're talking about "consensus" grading and the accuracy is NOT 85%, 90%, 99% - its more like 65%, 70& 75% - there are too many misgraded coins residing in plastic (even the "respected" TPGSs) to claim a 99% accuracy rate.

[michael]

an interesting thread

and with coin meds and much coin counseling

 

i have beocme how shall i say this less verbose in posting the written word on these wonderful coin boards

[michael]

and from what i have seen in holders as of late they cant get it right 90%+ of the time when it comes to pricing coins as with 90%+ of slabbed coins if they are broken out of their respective holders you will not be able to get the same price for the coin as when it was in the plastic holder

 

and for some series like bust halves in unc. they most all 90%+ have rub no brainer prononunced wear in unc. so none are accurately graded

[Merc]

for some series like bust halves in unc. they most all 90%+ have rub no brainer prononunced wear in unc. so none are accurately graded

 

Bust Halves are the trickiest coins to grade. I've have seen them in MS60-62 holders where the reverse has no trace of circulation or rub. The obverse has light hairlines and there are a few luster breaks. The fields are great and show no marks from circulation. The coin probably has never circulated. It has just been cleaned with a cloth on the obverse from owners long ago.

 

Would you call a coin like this AU because of the breaks in luster from a light cleaning?

[michael]

yes

[michael]

Michael -- What prompted you to resurrect this post?

 

i dont know i just felt like it

 

i do wild and crrzy things like the other day i ordered extra cheese on a pizza no reason i just was daring and went for it

 

same with the extra cherrie i had the ice cream maker put on top of the sundae

 

i am like this spontaneuos

[IGWT]

wild and crrzy

[HaydenTubbs]

wild and crrzy

 

Chris and his Dueling Banjos!