Is Third Party Grading good for numismatics?

[Newmismatist]

There’s a lot of hype on the PCGS forum about which grading service is the “best”. We repeatedly see forum members here complaining that NGC can’t grade - my crossover was down-graded, BB’d, wouldn’t cross, etc. The complaining certainly isn’t limited to NGC - as we all read the complaints about why’d PCGS grade this XX instead of XY? Then there’s the few shills shouting: PCGS is the best (or even the only) grading service to the point were they actually argue that the plastic on the outside is more important than the coin on the inside. On the NGC forum you’ll similar threads, usually asking how could PCGS grade this coin MS65FH or MSXX, but all with the same general theme - ie PCGS got it wrong. After reading these various threads, both on the PCGS forum and this forum, a newbie would conclude (with ample support by lots of forum members) the following:

 

1. PCGS accurately grades coins

2. PCGS undergrades coins

3. PCGS overgrades coins

4. PCGS bags coins that should have graded (example coin is NT, bagged as AT)

5. PCGS grades coins that should have bagged (example coin is AT, graded as NT)

6. NGC accurately grades coins

7. NGC undergrades coins

8. NGC overgrades coins

9. NGC bags coins that should have graded (example coin is NT, bagged as AT)

10. NGC grades coins that should have bagged (example coin is AT, graded as NT)

 

In fact, if our Newbie were to believe all the comments and opinions expressed in the various threads that deal with grading, including those that question such things as color (RD, RB, BN) strike designations (FH. FL, FS, etc) and toning (AT, NT, AT but market acceptable), our Newbie could easily conclude that buying coins graded by EITHER of the major grading services was about as risky as jumping into pool filled with hungry sharks.

 

Originally the concept of third party grading was promoted as a means of protecting collectors from the risks of buying over-graded coins or coins that had been “played” with to give the appearance of a higher grade. The corollary benefit to dealers was that if collectors could rely on the protection of a RELIABLE third party grading opinion, they would be more comfortable in buying coins, thus spending more money for coins (presumably rare coins). Dealers would then be able sell more coins to more collectors, without the controversy as to whether they had overcharged the collector for an over-graded coin. Third party grading (TPG) was an expansion of the authentication service then provided by ANACS, which had been promoted by the ANA as a way of eliminating counterfeit and altered coins from the numismatic market place.

 

The concept of third party grading was started in 1986. After 17 years of Third party grading, the questions are:

 

1. Have the two major third party grading services (PCGS and NGC) helped the collector?

2. Has third party grading been beneficial to the hobby of coin collecting?

3. Is third party grading just a clever marketing scheme and the collector is no better off than he (or she) was prior to third party grading?

4. Is third party grading more beneficial to dealers or collectors?

5. Are we better off with third party grading? or was it better before third party grading?

[braddick]

It is good.

It's up to the Collector to determine how seriously he takes what the Services offer in rendering their opinions.

[TomB]

I think that third-party grading, in the form that we are more or less familiar with now, started in 1979 with ANACS. Also, the tremendous expansion of thrid-party graded coins was done more to permit sight-unseen trading than it was to protect collectors. These are minor points and are open to interpretation.

 

As for your listed questions-

1) Yes, they have both helped the collector immensely.

2) Yes, the form that third-party certification has taken has helped the market take off and has been beneficial; these are subtely different statements.

3) While third-party certification is very clever, it still has had an enormous impact upon numismatics and much of that impact has been positive, if unintended.

4) Excellent question!!! Dealers.

5) We are much better off in the current state of the market than if third-party certification had never happened.

 

Good thread!

 

[MarkFeld]

Hopefully, I'm allowed to answer over here, too :

 

Is Third Party Grading good for numismatics? In my opinion, absolutely yes.

 

Is it a panacea that eliminates all problems? Of course not. Nor, should we expect it to be.

 

Regardless of what one thinks of the grading (standards, consistency or lack thereof, etc,) in the case of PCGS, NGC and some others, at least, it is being done by people who do not own the coins or have a financial interest in them. Accordingly, the graders and evaluations are likely to be far more objective, than the owners of the coins would be.

 

PCGS and NGC also offer guarantees. And, while people aren't always satisfied with them, consumers receive considerable financial protection, especially with respect to counterfeits.

 

Sight-unseen trading is not what some hope, but I'd sure rather have an NGC or PCGS coin than an uncertified one, if I or a family member had to sell it.

 

I think it's great, that in many cases, someone can pick up the phone or send an email and get a sight-unseen offer on a coin or collection, almost anywhere around the country. Granted, sight-unseen offers wont help a seller realize top dollar for PQ coins, extra pretty ones or more esoteric items that don't really lend themselves to sigh-unseen offers, but it sure beats the old days.

 

Due to third party grading, the hobby and business have come a long way, with respect to liquidity, consumer protection, a more level playing field for the non-experts and the sophistication of and respect for the rare coin industry.

 

There are still plenty of problems today, but as a whole, I think today's environment is MUCH preferable to what we had before third party grading came into being.

 

[michael]

it ALL depends................

 

 

 

 

CAN BE A HUGE BENEFIT TO THE HOBBY

 

IF.............

 

you buy the coin and not the holder

 

and from your specialities in such types of coins you see a coin in a third party holder and it extremely eye appealling AND *special* for the grade

 

UNDERgraded OR AT THE VERY LEAST SOLID FOR THE GRADE

 

and the price is a reasonable value in your minds eye

 

and you like the coin

 

and you have the funds, DISCRETIONARY FUNDS to buy the coin

 

and you do it for fun as a hobby

 

then yes in this above specific example for a specific slabbed coin it is extremely positive for the hobby, which is YOU!!

 

MICHAEL

[Hoot]

1. Have the two major third party grading services (PCGS and NGC) helped the collector?

 

Yes. The ways are almost too numerous to list. A few that stand out for me are that they protect the novice collector from being completely scammed. On average and for the vast majority of encapsulated coins, coins graded by NGC and PCGS are correct for the grade. Among the small percentage of people that the members of these boards make up, we tend to focus on the material that is improperly graded. In part, this is an excercise in our learning, as each of us is interested in knowing how to grade properly. (Sometime this comes to us the hard way and we are simply vocal about it). In part, this is a select few of us who are attempting to make an upgrade with a coin that has been undergraded. But these actions do not represent the majority of what PCGS and NGC have graded. The average collector of modern day cannot grade accurately. Thus, NGC and PCGS provide a necessary service.

 

2. Has third party grading been beneficial to the hobby of coin collecting?

 

Yes. It has put some measures of constraint on gradeflation. I realize it has not stopped this, but it sure has helped.

 

3. Is third party grading just a clever marketing scheme and the collector is no better off than he (or she) was prior to third party grading?

 

Third part grading is not just a clever marketing scheme, but it IS a clever scheme! Those who came up with the idea had the RIGHT idea at the RIGHT time. Can't fault them for marketing it.

 

4. Is third party grading more beneficial to dealers or collectors?

 

Collectors. Dealers often complain that they cannot get as much premium for a slabbed coin as they can a raw coin. I believe this as a generality having been involved in hundreds of transactions. For some coins, however, especially strike-designated coins, there's a better premium for slabbed and attributed coins.

 

Collectors are ardent about adhering to Greysheet values or some other such nonsense for most of their purchase of slabbed material. This is a benefit to the collector, especially when Greysheet values are generally so far off.

 

5. Are we better off with third party grading? or was it better before third party grading?

 

We are WAY better off. Third party grading has brought a modicum of consistency to the market. This has opened up the market to many more collectors and has brought a semblance of internal governing to the hobby that benefits all. For the seasoned collector, they can better hone their skills and do so more rapidly with the large availability of slabbed coins out there. The third party grading opportunities are there for the seasoned collector to take advantage of, and it makes many transactions more liquid than ever before. Granted, these aspects can work against the collector by adding many more "investors" to the hobby, but in the end, the collector benefits the same way that investors do.

 

Just my thoughts, Hoot

 

[GDJMSP]

1. Have the two major third party grading services (PCGS and NGC) helped the collector?

 

Yes - as has been mentioned the beginning collector has been helped immensely in my opinion. But so have more advanced collectors probably in ways they don't even realize. Whether we like to admit it or not - the grading companies have done a great deal by providing a benchmark for many of us to test our own grading skills against. Can any of you honestly say that you don't compare your grading skills against what it says on the slab ? Of course we do. And by doing so we improve our own skills.

 

 

2. Has third party grading been beneficial to the hobby of coin collecting?

 

Yes - it is my belief that because of third party grading we have more collectors today than we have ever had. For many collectors the advent of the slabbed coin has provided that extra bit of reassurance to go ahead and buy that expensive coin. For many collectors are not secure enough in their own knowledge to spend what they consider to be an expensive amount on a coin. But because a grading company stands behind its authenticity & grade - they do. And by being exposed to these more expensive coins a collectors knowledge is expanded. And anything that increases knowledge is a good thing IMO.

 

3. Is third party grading just a clever marketing scheme and the collector is no better off than he (or she) was prior to third party grading?

 

I think they are a lot better off now because it allows many more collectors to have a certain level of confidence in buying sight unseen. Which in turn allows them to add to their collections with greater ease and in a much shorter time frame.

 

4. Is third party grading more beneficial to dealers or collectors?

 

I think it is beneficial to both. It allows dealers to sell more coins to less knowledgeable collectors thus increasing their customer base and increasing their profits. And it also allows the dealer to be out from under the responsibility of establishing the grade of the coin they are selling. It helps collectors by lessening the chance of being taken advanatge of by an unscrupulous dealer and by helping to establish a preconceived notion of the value of the coin. It also helps collectors if and when they decide to sell their coins. The authenticity is already established as well as the grade of the coin.

 

 

5. Are we better off with third party grading? or was it better before third party grading?

 

We are definitely better off for all of the reasons already mentioned. However - none of this means that the grading industry cannot be improved upon. There is always room for improvement.

[Newmismatist]

Here’s my answer (unfortunately very long) to the questions I raised in this post.

 

1. Have the two major third party grading services (PCGS and NGC) helped the collector?

 

Overall, I think the answer is a yes. But this answer is multi-faceted. It has helped new collectors tremendously, the average collector a lot and the expert collector very little. New collectors seldom know how to grade properly - grading is an acquired skill, new collectors traditionally are the easiest collectors for an unscrupulous dealer to sell over-graded, whizzed and problem coins. Both PCGS and NGC do an excellent (but not perfect) job in preventing those types of coins from being put in slabs, in addition to preventing altered and counterfeit coins from being placed in the market place. Although the average collector usually has good grading skills, (generally in the area that he or she specializes in), third party grading allows the average collector to expand his interests in to areas in which he is not as knowledgeable, without having as much risk that he is being sold coins that are over-graded. There is still risk, but the chances of being outright swindled are much lower (but not eliminated). Expert collectors have probably benefitted the least from third party grading. Generally expert collectors have acquired good to excellent grading skills for a wide variety of coins, are familiar with strike designations (Full head SLQs, Full Band Mercury dimes, etc.), understand the interrelationship between strike, luster, eye-appeal and the value of coins. Expert collectors were generally the type of collector that skilled and reputable dealers enjoyed dealing with - they knew coins and when treated fairly, returned time after time to buy more coins for their collections. When they made mistakes, they tried to learn from their mistakes, not simply give it up because of one bad purchase. I think one of the downsides of third party grading is that dealers no longer have to rely on the expert collectors to maintain a steady clientele and thus collectors are not encouraged to acquire good grading skills as there seems to be a sense that its not needed.

 

2. Has third party grading been beneficial to the hobby of coin collecting?

 

Overall, I think the answer is a RESOUNDING yes. We have more collectors today than ever before and I think this is largely because of third party grading. I think many collectors believe that by buying coins that have been slabbed by PCGS and NGC, the inherent risk of owning and collecting coins is lowered. Altered and counterfeit coins are virtually non-existent in PCGS and NGC holders, and when the rare mistake happens, both services make every effort to get that coin off the market. The same is true with whizzed coins.

 

Unfortunately the same is not true with regard to mis-graded coins, nor with coins that have been expertly “doctored”. Although overall, both PCGS and NGC do an excellent (but not perfect) job in preventing those types of coins from being put in slabs, this is the area that is most problematic and causes the most controversy between collectors, dealers and the third party grading services. This is also the area in which everyone takes sides. You have the die-hard PCGS camp which is completely convinced that no service except PCGS can properly grade coins. The NGC camp is equally adamant and takes gleeful delight when any PCGS mistake is uncovered. Then there are the die-hard third party grading service haters who constantly point out the mistakes of both services, to them proof that the third party grading services can’t properly grade and they are the sworn enemies of coin-collectors as all they (PCGS and NGC) do is rip us off!

 

Whose right? The answer: NONE OF THE ABOVE. In this debate everyone seems to forget that grading is an OPINION. It’s not mathematics. I’m not certain both grading services even agree as to all the various definitions of the different strike designations. And, when you’re dealing with high grade MS & PR coins, I’m likewise not certain both grading services use the same criteria for coins graded above 66. If you have different standards, there will never be uniformity and agreement as to the grade of a particular coin. Furthermore, as grading is opinion, you will have variations between the individuals that grade the coins. Because of this you will ALWAYS have differences in grading, even within the same grading service; and when you have 2 different third party grading services with even slightly different grading criteria, you will have disagreement, not consensus.

 

Here’s my analysis of this situation. Grading is an opinion of the quality of a coin based upon four basic criteria:

 

1. The number of marks or abrasions,

2. The quality of the strike,

3. The toning and luster of the coin and

4. The overall eye appeal of the coin.

 

These criteria are NOT mathematically quantifiable. Therefore, it is a human interpretation of these always different observable conditions (like snowflakes, no coin is exactly like any other) that result in a numerical quantification of grade. As all humans will process this information differently, it is mathematically impossible to have all graders grade all coins exactly the same all of the time. So once you understand what and how numerical grades are assigned, you can deduce why the same coin will receive a different grade from the same service when re-submitted, and why the same coin can receive a different grade when cracked out and sent to the other grading service.

 

By way of example: if you took a statistically significant number of coins (it would probably have to be at least 300-500 coins, maybe even as many as 1000 coins), sent them to each of the grading services to be graded several times (minimum 3 times, maybe even as many as 5 times) over a period of say one year, here’s what you would see (what follows is my educated guess based on statistical samples): Both services would agree on the exact grade about 50-60% of the time - so for 1,000 coins graded, about 500-600 would be graded the same nearly 100% of the time. (For those familiar with statistics, this is a “Bell Curve” example). Then you would have the “problem” coins: My (educated) guess: Approximately 25-30% of the coins would be undergraded and 15-20% of the coins would be over-graded. I would further guess that neither service would be more “accurate” than the other, assuming that the graders at each service are skilled coin graders. Why? Because each service has human beings who render their best judgment as to their opinion of the grade for that coin on that particular day - this is a variable that cannot be perfectly replicated on different days by different individuals over diverse periods of time.

 

What we have done as collectors is concentrate on that percentage of either under-graded or over-graded coins that BOTH PCGS and NGC invariably will mis-grade, and we draw the conclusion that the services are incapable of getting it right. What we miss is that both third party grading services get it right more often than wrong AND even when they get it wrong, it’s within the statistical margin of error (eg: if a coin is a high-end MS64 or a low end MS65, about 1/2 the time it will be mis-graded perhaps by a margin of less than 1/10th of a point). That type of error is statistically insignificant and within the standard of human deviation for rendering an OPINION. So most criticism of the grading by PCGS and NGC is not even warranted as it is within the margin of human error. Therefore, I believe that PCGS and NGC are more accurate in grading large quantities of diverse coins than any collectors would be on an individual basis. They’re not right all of the time, but they are more accurate more consistently than any individual collector would be for the many different coins that they grade. Conversely, an individual collector with good grading skills who specializes in a particular series would likely be more consistently accurate than either PCGS and NGC for that particular series - for the simple reason that the collector has made a greater effort to understand the subtle nuances of that series of coins and he/she would have an advantage over a third party grader who has to know how to grade EVERY series of coins.

 

3. Is third party grading just a clever marketing scheme and the collector is no better off than he (or she) was prior to third party grading?

 

I believe a knowledgeable collector is better using the positive aspects of the third party grading services to assist in acquiring high quality collectable coins. Unfortunately, any collector who basis his collecting decisions on only what the piece of paper in the slab say is headed for disaster. Unfortunately, neither PCGS nor NGC is 100% right 100% of the time for 100% of the coins they grade.

 

4. Is third party grading more beneficial to dealers or collectors?

 

I believe both dealers and collectors have benefitted from third party grading. Dealers can more easily sell coins to the collecting public and when collectors go to sell their coins, they are far more marketable than they were prior to third party grading. I would add that third party grading has probably benefitted PCGS and NGC more than either dealers or collectors, but NOT to their exclusion.

 

5. Are we better off with third party grading? or was it better before third party grading?

 

I believe we are much better off with third party grading, particularly if you are a knowledgeable collector who takes the time to learn how to grade and makes an effort to understand what grading standards PCGS and NGC use when they grade coins. Third party grading can and does assist collectors in putting together wonderful coin collections.

 

However, those who erroneously think that the name on the plastic is more important than the coin inside will invariable prevent themselves from purchasing many outstanding coins. Anyone who says I won’t buy PCGS graded coins or NGC coins for whatever reason has just prevented himself from acquiring a significant number of outstanding coins that are

available in the marketplace. My question is why punish yourself because they both make mistakes? Learn how to grade and don’t make the same mistakes!

 

In a recent thread a forum member across the street stated: “NGC can't grade coins.” I asked this question in response: “Really? Can You?” Now it is fundamental: If you yourself can’t grade, how can you possibly know if someone else can grade? Here was the response: “I don't need to know how to grade coins. That is what the professional graders are for. That is why I only buy PCGS coins. They are the best coins!”

 

The above statement: “I don't need to know how to grade coins” is absolutely a recipe for disaster. It is a pathological refusal to utilize the minimum of human intelligence to be a successful coin collector. It suggests a frontal lobotomy, visual impairment and deafness so as to be incapable of using those senses to know what you’re buying. First you should at a minimum LOOK at what you’re going to buy. Second, many dealers and collectors will tell you whether a slabbed coin is a PQ coin for the grade, accurately graded or over-graded in relation to what is listed on the slab. Some will be brutally direct, some will be more circumspect, but virtually every dealer and collector will give you their 2 cents worth if asked.

 

If you enjoy collecting coins here’s a few simple rules that will help you to acquire a world class coin collection when buying any third party graded coins:

 

1. Learn how to grade so you can make your own independent assessment as to the quality of the coin.

2. Buy the coin not the plastic.

3. Avoid the slabbed coins that are over-graded mistakes and

4. Buy every mis-graded coin that you can afford that is under-graded, whether by PCGS or NGC.

 

My apologies for this long post, but in the past year that I’ve participated in this forum I’ve read thousands of words bashing the third party grading services, bashing their mistakes, complaining about the over-grades, the under-grades, the mis-attributions, that service X can’t grade and service Y is too lenient, and that all the third party grading services want is to screw us collectors. Often the many forum members who make excellent comments regarding both the positive and negative aspects of third party grading are drowned out by those few who argue that the only way to collect is to choose up sides in the grading service war. My purpose in this post is to suggest that we collectors will be better served by passing on the “war’ and using both PCGS and NGC to help us acquire great coins.

 

We win when we use their services as another tool to assist our collecting efforts. We gain nothing by arguing that one is better than the other, and we certainly lose if we blindly refuse to use their knowledge and opinions to help us become more knowledgeable collectors.

 

Just my humble opinion for whatever it’s worth, (based on over 50 years of collecting everything from circulated Lincoln cents to proof $20 Gold).

 

 

[James_OldeTowne]

I can only speak for myself. For sure, Third Party Grading has helped me establish grading skills, and also to recognize "problems". It has NOT helped me as far as actually buying coins. In other words, I don't really feel any more comfortable buying encapsulated coins than I do raw coins. There's a reason for this, simply that when I've made mistakes buying encapsulated coins, they have tended to be LARGE mistakes. Starting out, there were coins I bought in slabs for greysheet, and they sat in my inventory literally for years at just a modest 10% markup, because I bought poorly graded coins. The slab didn't matter, whether NGC, PCGS, or ACG, it just didn't matter. Crummy coins are crummy coins no matter who slabbed them.

 

So, the grade on the slab is a starting point only, and if you are not educated, you will still get burned. I have definitely learned to examine every coin just as if it were raw.

 

The biggest benefit in slabs that I see is that it is a great "rough cut / first pass" through the grading process. I know that if the coin is in a PCGS, NGC, ANACS or ICG holder, there's about an 80% chance that it's within a point or two of the proper grade. Whereas with a raw coin, unless you're buying from one of the established dealers, it might be only a 20% chance that it's within ten points of a proper grade.

 

One thing's for sure, for newbies or folks that are just not experienced in coins, third party grading provides a great benefit. It is much more difficult for a shady dealer to take advantage of a newbie as long as they stick to slabs. But I think that as you advance in the hobby and become more knowledgeable, the value of the encapsulation becomes less and less.

 

I've gone through two periods regarding third party grading. I started out thinking it was the greatest thing ever. Then, when I got stuck with some of those crummy coins, I hated third party grading. (In fact, there was a point at which Dennis and I had had enough, and we just cracked out every single certified coin we owned). I am now to the point where I can live with and without slabs, and have come to realize that as long as the focus is on the coin, the third party grading is just a tool that can HELP, but never replace experience.

 

The last thing I will say in this long-winded post is that the two worst cases I personally know of with folks losing money in coins have been with encapsulated coins (ask Dennis and me about that some time). It was not because of the grades per-se, but with the ability of the dealers (actually telemarketers) to take advantage of the hype surrounding slabs. Dennis can correct me if I'm wrong, but one gentleman has lost at least $70,000 on $120,000 worth of encapsulated coins (all NGC and PCGS), and another lost approximately $15,000 (mostly PCGS, NGC, some ANACS). Again, it was lack of knowledge of the reality of encapsulated coins, not the encapsulation itself, that allowed them to be so heavily taken advantage of.

 

James

[michael]

ttt

 

michael

[James_OldeTowne]

5. Are we better off with third party grading? or was it better before third party grading?

I like to come back to this question every so often and ponder my current point of view. It seems to me that the recent economic downturn may have helped push prices down closer toward tolerable levels, but I still see what seem to be insane amounts paid for coins in certain slabs. For example, despite some of our efforts to illustrated the current reality, "prior generation" slabs still seem to command automatic premium bids at auctions.

 

I have just about wrapped up my current round of cataloging (in the proofreading stage now), and many of the slabs are old ones (rattlers, no-line fatties, ANACS small-format). I'll be very interested to see whether these seem to still command premium bids at a fair auction venue.

[cpm9ball]

I'll look forward to getting the catalog so I can follow them, too!

 

Chris

[leeg]

They had a nice start with a great business model and cared about the collector. Don't know if that is true much anymore. $$$$'s are the majority of what's it all about now.

 

As a hint, I'm not thinking this about N but P.

 

Enjoy your coins:

 

[James_OldeTowne]

They had a nice start with a great business model and cared about the collector. Don't know if that is true much anymore. $$$$'s are the majority of what's it all about now.

 

As a hint, I'm not thinking this about N but P.

 

Enjoy your coins:

Well, a certain someone does need to pay for a big new home on the beach in California.