Why not just create a new third-party grading service?

[James_OldeTowne]

TPGs have had much impact on the hobby, both good and bad. Their presence has eliminated many of the counterfeits and altered coins from the market, and have at least added some stability to grading standards (though that's debatable). They have also (in my opinion) been very much part of the cause of escalation in the cost of coins. But these are all debatable issues.

 

So why not, as others have suggested, just create a new grading service, instead of using the "sticker" idea? At this point, I don't think that would add any more cost to coins, but would provide an alternative to the current two services that are allegedly letting all these "bad" coins get through.

 

The idea isn't mine - it's been suggested by several others, and seems to have some merit. I'd personally be all for it!

[123cents]

I think whenever a coin's grade is linked to a monetary value there is going to be controversy. If another TPG service is formed or when the Consortium gets under way, there is still going to be controversy.

[BillJones]

The really important point remember about this consortium outfit is that they are in the pass/fail grading business. They are not sticking their neck out and assigning a grade to a coin. They are merely saying “I agree,” or they are saying nothing.

 

That makes the job a lot easier. Saying “Yes” or “No” is a much simpler task that starting from scratch with raw coin and deciding:

 

• Is it genuine?

• Has it been cleaned?

• Has it been altered?

• Has it been repaired?

• Has it been damaged? If so is the damage such that the coin can’t be assigned a grade?

• What is the grade on the 1to 70 scale using the many grading numbers that are now in play?

 

Basically what they claim to be doing is the same thing that honest, conscientious dealers have done for their customers for years. They claim to be filtering out the “spoon” and selling only the properly graded material.

 

Here’s something that could prove interesting. Will any of these dealers have coins for sale that don’t carry their approval sticker? If so it would be worth our while to study these pieces so that we will be able to tell the “spoon” from the cream. That could be most enlightening.

 

But, no I’m not thrilled to think about having a situation where we will need TWO levels of grading in order to sell a coin. One grade supplied a TPG and a second opinion from a kibitzer.

[goldrarities.com-migration]

Bill,

 

When it comes to grading a coin I think John Albanese is all set. He is acknowledged throughout the industry as one of the best and has far more experience in that field than any grader currently employed at either service and I am sure that he will surround himself with some of the best at CAC when all is said and done.

 

 

 

 

[carson city]

Possibly "when it is all said and done" CAC will be done-in !

[DirtyGoldMan]

TPGs have had much impact on the hobby, both good and bad. Their presence has eliminated many of the counterfeits and altered coins from the market, and have at least added some stability to grading standards (though that's debatable). They have also (in my opinion) been very much part of the cause of escalation in the cost of coins. But these are all debatable issues.

 

So why not, as others have suggested, just create a new grading service, instead of using the "sticker" idea? At this point, I don't think that would add any more cost to coins, but would provide an alternative to the current two services that are allegedly letting all these "bad" coins get through.

 

The idea isn't mine - it's been suggested by several others, and seems to have some merit. I'd personally be all for it!

 

I have suggested in the past, as well. If the current grading companies are not doing the job well enough, create a grading company to do it better. I think that this would sit well with the numismatic community and would silence many of the critics. Third party grading is established in the marketplace. Fourth party approval is not established.

[Zoins]

TPGs have had much impact on the hobby, both good and bad. Their presence has eliminated many of the counterfeits and altered coins from the market, and have at least added some stability to grading standards (though that's debatable). They have also (in my opinion) been very much part of the cause of escalation in the cost of coins. But these are all debatable issues.

In addition to rising coin costs, some have speculated that they have also led to increased "alteration" of coins when said alteration is deemed "market acceptable." This latter issue is probably more on the minds of CAC founders than rising coin prices. Indeed, some dealers complain that TPG standards are depressing coin prices.

[ziggy29]

It would be exceedingly difficult to start up a new TPG. It's a Catch-22 situation in the extreme; you don't get market legitimacy and acceptance unless you've encapsulated a significant number of coins, and you won't get a significant number of "good" coins to slab if the marketplace hasn't fully accepted your product yet.

 

Such an entity would have to be prepared to take losses for quite a long time, IMO, until it gained full credibility and the trust of the marketplace. And no matter how good a new TPG might be in the future, most of their early good works would probably be cracked out to "Brand P" anyway. Market perception of marketability of each service's slabs tends to create a self-fulfilling prophecy as to where the "good" coins are holdered. Any service can get the grade right, but if the same grade in the "right" holder will fetch 50% more, the other services have no chance.

[TJ'S Coins]

Graders are humans and grading will always remain somewhat subjective. Another grading service would filled by more human graders who will be out to eventually run at least a break even if not profitable business. I don't see how this would solve the problem.

 

The pass/fail system of the consortium has some merit but with the degree of difficulty we have discerning AT from NT on these boards, it will not be fool proof either. Market acceptable is something that changes over time just as we have seen grading change too.

 

Will people who fail to have their coins pass the consortium then try to have them slabbed by a different TPG then re-submitted to the consortium for approval and then resell them, passing the cost on to the consumer or will they simply consign failed coins to the bottom dwellers of the hobby?

 

If a coin does not possess the sticker of approval will its value drop accordingly since it may be perceived to be a "problem" coin?

 

It all remains very subjective.

 

 

[BillJones]

[i have suggested in the past, as well. If the current grading companies are not doing the job well enough, create a grading company to do it better. I think that this would sit well with the numismatic community and would silence many of the critics. Third party grading is established in the marketplace. Fourth party approval is not established.

/quote]

 

Companies have tried open and establish major grading services. The best example was ICG. They started off with good intentions but the market and some very unfair comments by leading dealers pounded them down. ICG was done in by three factors.

 

- There are a bunch of people out there won't look at anything but PCGS (most especially) or NGC (to a lesser extent) slabs. These people will not give the others a chance, even if their product is equal to better than "the big two."

 

- When a company like ICG slabs a really nice coin that is a huge chance that the really nice stuff will get cracked out and crossed over. What is left is every mistake that ICG ever made and run of the mill stuff.

 

- Dealers must respond to what their customers are buying. That re-enforces the problem I noted in point #1.

 

For these reasons I don't think that grading firm with aspirations to become a market leader is going to be able to make it, and I’m very sorry to have to write that.

[Zoins]

The pass/fail system of the consortium has some merit but with the degree of difficulty we have discerning AT from NT on these boards, it will not be fool proof either. Market acceptable is something that changes over time just as we have seen grading change too.

I think the point of CAC is that we don't have to change. I don't think we can always definitively tell AT from NT but one test for me would be whether CAC would make the buyer whole on the $46k Gobrecht. I'd be interested to hear how CAC would deal with that situation if they had approved the coin in the PCGS slab and then the AT was exposed. If they would make the buyer whole, I can see people relying on the service they provide. If they wouldn't, their benefit is a bit more dubious IMO. I recall that both TDN and Mark were vocal on that coin so I'm interested to hear how CAC would respond.

[TJ'S Coins]

The pass/fail system of the consortium has some merit but with the degree of difficulty we have discerning AT from NT on these boards, it will not be fool proof either. Market acceptable is something that changes over time just as we have seen grading change too.

I think the point of CAC is that we don't have to change. I don't think we can always definitively tell AT from NT but one test for me would be whether CAC would make the buyer whole on the $46k Gobrecht. I'd be interested to hear how CAC would deal with that situation if they had approved the coin in the PCGS slab and then the AT was exposed. If they would make the buyer whole, I can see people relying on the service they provide. If they wouldn't, their benefit is a bit more dubious IMO. I recall that both TDN and Mark were vocal on that coin so I'm interested to hear how CAC would respond.

 

Good point!

 

For the record, if I was spending 46K on a coin I would want all the assurance that I could get that it was a good buy for the money.

[MarkFeld]

The pass/fail system of the consortium has some merit but with the degree of difficulty we have discerning AT from NT on these boards, it will not be fool proof either. Market acceptable is something that changes over time just as we have seen grading change too.

I think the point of CAC is that we don't have to change. I don't think we can always definitively tell AT from NT but one test for me would be whether CAC would make the buyer whole on the $46k Gobrecht. I'd be interested to hear how CAC would deal with that situation if they had approved the coin in the PCGS slab and then the AT was exposed. If they would make the buyer whole, I can see people relying on the service they provide. If they wouldn't, their benefit is a bit more dubious IMO. I recall that both TDN and Mark were vocal on that coin so I'm interested to hear how CAC would respond.

Please understand that I am speaking only for myself here......

 

If a third party graded coin were to be exposed as obviously artificially toned (as in the case of before and after images which made it obvious that it was the same coin), I see absolutely no reason why the grading company shouldn't honor their guarantee. And that should apply, whether another party subsequently agreed with the assigned grade and/or posted a sight unseen bid on it, or not. Likewise, if a person or company posts a sight-unseen bid on a coin, he/it should be bound to honor it, regardless of what he thinks of or learns about the coin.

 

Once you sell a coin to another party, the grade guarantee no longer applies to you. But, if it is later determined that the coin was artificially toned, the current owner of the coin should be able to take the grading company up on its guarantee. And, if it turns out that there is a sight unseen bid on it, the owner should be free to hit the bid and let the bidder/buyer be the one to approach the grading company to get them to honor their guarantee.

[TomB]

So why not, as others have suggested, just create a new grading service

Money.

[Zoins]

The pass/fail system of the consortium has some merit but with the degree of difficulty we have discerning AT from NT on these boards, it will not be fool proof either. Market acceptable is something that changes over time just as we have seen grading change too.

I think the point of CAC is that we don't have to change. I don't think we can always definitively tell AT from NT but one test for me would be whether CAC would make the buyer whole on the $46k Gobrecht. I'd be interested to hear how CAC would deal with that situation if they had approved the coin in the PCGS slab and then the AT was exposed. If they would make the buyer whole, I can see people relying on the service they provide. If they wouldn't, their benefit is a bit more dubious IMO. I recall that both TDN and Mark were vocal on that coin so I'm interested to hear how CAC would respond.

Please understand that I am speaking only for myself here......

 

If a third party graded coin were to be exposed as obviously artificially toned (as in the case of before and after images which made it obvious that it was the same coin), I see absolutely no reason why the grading company shouldn't honor their guarantee. And that should apply, whether another party subsequently agreed with the assigned grade and/or posted a sight unseen bid on it, or not. Likewise, if a person or company posts a sight-unseen bid on a coin, he/it should be bound to honor it, regardless of what he thinks of or learns about the coin.

 

Once you sell a coin to another party, the grade guarantee no longer applies to you. But, if it is later determined that the coin was artificially toned, the current owner of the coin should be able to take the grading company up on its guarantee. But, if it turns out that there is a sight unseen bid on it, the owner should be free to hit the bid and let the bidder/buyer be the one to approach the grading company to get them to honor their guarantee.

One issue is whether CAC will recognize what TPGs classify as "market acceptable." Both of the TPGs covered by CAC have public statements saying they will encapsulate problem coins that are "market acceptable." Gobrechts are one area where there is a noticeable number of problem coins in TPG slabs. If CAC approved a TPG slabbed coin but later it turned out to be "AT market acceptable" where the TPG says it's fine, will CAC also say it's fine?

 

I can see value provided by CAC if CAC does not approve "market acceptable problem coins" and will make buyers whole if they make a mistake when the TPG will say it's "market acceptable" and call it a day.

 

I guess it comes down to whether or not "market acceptable" problem coins are acceptable to CAC. I'm interested to know CAC's position on this because it can impact the amount of value CAC provides to collectors, especially those that want original coins.

[James_OldeTowne]

((( If a third party graded coin were to be exposed as obviously artificially toned (as in the case of before and after images which made it obvious that it was the same coin), I see absolutely no reason why the grading company shouldn't honor their guarantee.)))

 

Mark, I understand your point, but there is a flaw. I might crack out a blast-white coin, stick it in an album for two years such that it (incidentally) tones nicely, then get it recertified.

 

(((The really important point remember about this consortium outfit is that they are in the pass/fail grading business. They are not sticking their neck out and assigning a grade to a coin. They are merely saying “I agree,” or they are saying nothing. That makes the job a lot easier. Saying “Yes” or “No” is a much simpler task that starting from scratch)))

 

Bill, good point. However, I'd respond by saying that the "Pass/Fail" test is a cheap way to "re-certify" a coin, but being cheap, it's also going to generate poor revenue (whether that matters or not). If the began a new grading company, though, couldn't they then also charge more, on par with NGC or PCGS, and be a profit center to support the additional overhead of a complete grading procedure?

 

In such a case, I would want that new service to not add all the frilly stuff that PCGS and NGC do. No attributions, no stars, no pop reports, no "World Series of Grading", no "body bags", no "details only" grades, no "NCS", and no ANA endorsements. Just give me a date/mintmark, a grade, and a pedigree if applicable.

 

I don't know, just speculating. But considering the eruption that the premature "CAC announcement" caused, it's apparent to me that there are manydisgruntled coin collectors out there. And I think much of this stems from the frilly stuff the grading services have gotten involved in.

[MikeInFL]

 

So why not, as others have suggested, just create a new grading service, instead of using the "sticker" idea? At this point, I don't think that would add any more cost to coins, but would provide an alternative to the current two services that are allegedly letting all these "bad" coins get through.

 

 

I myself have asked that same question, and I can only surmise that the founders of the CAC feel that they can reach their goals without having to directly compete with the TPGs. Given the TPG's head start and the power of the status-quo, the ability of a startup, however well intentioned, may be limited.

 

However, that hasn't stopped me from giving the whole idea some thought, and I thank those of you who I've discussed this publically and privately with...

 

Here's the idealistic way I'd set it up:

 

1) Start a grading company, and structure it as a not-for-profit or a privately held corporation -- no public ownership and the neverending chasing of profits that come as a result.

 

2) Devise an organization (or organizations) that ensure a clear division between:

 

a) Those who set the grade standards.

b) Those who grade the coins.

c) Those who arbitrate the guarantee of the grade.

 

3) None of 2a), 2b) or ), above, can buy or sell coins.

 

The problem is that it will be difficult to find people who have the skill and are willing to not participate actively in the hobby, along with the deep pockets (think hundreds of millions of dollars) it will take to release the current TPG's stranglehold on the market as alluded to in Bill's most recent post. Given the high costs of entry and into the TPG market and the relatively low ROI that would result, I suspect that direct competition is not the best method to accomplish the goals of the CAC, as I understand them.

 

But a guy can dream, can't he?...Mike

[just-john]

I don't think 46 K MEANS that much to PCGS

I don't think we can always definitively tell AT from NT but one test for me would be whether CAC would make the buyer whole on the $46k Gobrechtas

AS of March 31st, 2007 the company still retained $43 million of shareholder capital on its balance sheet. the total market capitalization of the company is only $114 million Thus, the cash represents almost 40% of total capitalization.

[James_OldeTowne]

Here's the idealistic way I'd set it up:

 

1) Start a grading company, and structure it as a not-for-profit or a privately held corporation -- no public ownership and the neverending chasing of profits that come as a result.

 

2) Devise an organization (or organizations) that ensure a clear division between:

 

a) Those who set the grade standards.

b) Those who grade the coins.

c) Those who arbitrate the guarantee of the grade.

 

3) None of 2a), 2b) or ), above, can buy or sell coins.

 

The problem is that it will be difficult to find people who have the skill and are willing to not participate actively in the hobby, along with the deep pockets (think hundreds of millions of dollars) it will take to release the current TPG's stranglehold on the market as alluded to in Bill's most recent post. Given the high costs of entry and into the TPG market and the relatively low ROI that would result, I suspect that direct competition is not the best method to accomplish the goals of the CAC, as I understand them.

Mike, that's a well thought out and concise arrangement. I like it!

 

(thumbs u

[Tradedollarnut]

Hypothetically, the hardest part of starting a complete grading company is getting good graders. After all, the company is only as good as its graders. They can't work in the industry anymore, so the only ones you can hire have to be failed dealers [or they'd be making more than you can pay them].

 

Not a recipe for success if you ask me.

[BillJones]

Hypothetically, the hardest part of starting a complete grading company is getting good graders. After all, the company is only as good as its graders. They can't work in the industry anymore, so the only ones you can hire have to be failed dealers [or they'd be making more than you can pay them].

 

Not a recipe for success if you ask me.

 

Getting established in the rare coin market is the problem for a new service, not the graders.

 

"Real graders" would be more conservative than the guys who are doing it now, and that won't fly. So long most collectors, with real money to spend, refuse to buy anything but PCGS or, less often, NGC graded coins, the majority of the good coins will be cracked out and regraded in PCGS and NGC holders.

 

[ziggy29]

Hypothetically, the hardest part of starting a complete grading company is getting good graders. After all, the company is only as good as its graders. They can't work in the industry anymore, so the only ones you can hire have to be failed dealers [or they'd be making more than you can pay them].

Not sure I completely agree. A sufficiently capitalized business could pay just about whatever it takes to hire the best graders, and it won't matter because the market won't immediately accept them as on par with the biggest names in the grading business today. They could be the best grading firm ever, but before they are established and accepted as such, their coins would probably sell at a discount in the marketplace, and as such their good work will be cracked out and crossed over to PCGS.

 

Market acceptance is, by far, the greatest barrier to the success of a new grading service.

[James_OldeTowne]

Hypothetically, the hardest part of starting a complete grading company is getting good graders. After all, the company is only as good as its graders. They can't work in the industry anymore, so the only ones you can hire have to be failed dealers [or they'd be making more than you can pay them].

 

Not a recipe for success if you ask me.

TDN, thanks for the response. As a very successful businessman, I appreciate and respect your insights.

 

I would want to follow up with noting that CAC already has John Albanese and (I believe) Mark Feld on board. Isn't that two-thirds of a high-caliber grading team right there? Additionally, if the plan is to exclude "moderns" and "bullion coins", it would seem the load would be light enough for just three graders to handle.

 

Of course, I have no idea what graders are paid, but one would hope the fees for the services they render would pay their salaries.

[BillJones]

Please bear in mind that this CAC outfit is only going to give its seal of approval to coins that have already been graded. They are NOT a new grading service. The coins will still be in PCGS and NGC holders.

 

CAC will be kind of like the Good Housekeeping Seal of Approval. Companies that get that for their products still have to market their products under their brand name successfully. The Good Housekeeping seal only provides a marketing boost.

 

What CAC is doing is FAR easier to sell than introducing a new grading service. They won't have to worry about having their coins cracked out and sent to a leading service UNLESS the crack out artists think that the potential for getting a higher grade on the coin out weighs the slab as it is with the CAC approval on it.

 

This thing will fly if the cartel of dealers who belong to it are able to sell the concept to collectors, investors and speculators. The investors and speculators could well be the cartel's target audience.

 

[carson city]

Quite Possibly !

[ziggy29]

This thing will fly if the cartel of dealers who belong to it are able to sell the concept to collectors, investors and speculators. The investors and speculators could well be the cartel's target audience.

I agree with you, particularly on the last sentence. And personally, I think what's good for investors and speculators is NOT good for collectors.

 

 

[BillJones]

This thing will fly if the cartel of dealers who belong to it are able to sell the concept to collectors, investors and speculators. The investors and speculators could well be the cartel's target audience.

I agree with you, particularly on the last sentence. And personally, I think what's good for investors and speculators is NOT good for collectors.

 

 

Yes I agree. What's good for investors and speculators IS NOT good for collectors. Of course it is beyond the comprehension of most investors and speculators that the COLLECTOR is the ultimate consumer who supports the market in the long run. Without collectors, coins are worth no more than their face value or melt value, which ever is higher, because speculation without collectors is nothing more than the bigger fool market. But some speculators a dumb enough think they would be better off without the collectors around.

 

Speculators drive up prices artificially, which often leaves knowledgeable collectors on the sidelines. The bubble does burst eventually, as it did in 1980 and 1989, but in the end no one is happy. The speculators lose money, and collectors are driven from their hobby for time.

 

[James_OldeTowne]

This thing will fly if the cartel of dealers who belong to it are able to sell the concept to collectors, investors and speculators. The investors and speculators could well be the cartel's target audience.

Bill, that's a terrific point, and I remember seeing someone else ATS imply the same things.

[carson city]

So how is CAC good for the Hobby ?

[jesbroken]

Great idea, Mike. As was James' idea before. I agree that a different TPG with a totally different set of standards is needed. But you necessarily do not need to start a new one. Buy one already established if possible and change it to the new standards. Write grading guidelines that if good enough the public will embrace and no one will have a choice but to at least acknowledge them as legitimate. Completely guarantee your work and the biggest no-no of all(as you stated) absolutely abstain from the buying/selling of coins. If additional profits are needed, sell coin supplies.

There is a forum member that specializes in security, who speaks on the forum in regards to new software that could be converted to use to grade coins to some extent.

There are many avenues to be taken by individuals wishing to better the hobby in the grading category, but competing with others and offering no guarantees nor reasoning as to your work should not be one of them.