What do you think? : Salzberg Advises: Research PCGS Populations and Prices

[James_OldeTowne]

I don't know whether anyone has mentioned, it, but there's a seemingly obvious incentive for PCGS to "make" some new high grade / value coins these days. From the PCGS website:

 

*The Guarantee Premium is equal to 1% of the value of the coin in its final grade. The value of the coin is determined by the PCGS Price Guide value for that grade or the Declared Value of the coin, if the Price Guide value is not available. The minimum amount for the Guarantee Premium is $5. PCGS reserves the right to make the final determination of the coin’s value.

 

(reference: http://www.pcgs.com/servicesandfees )

 

In seems like, at this high-value grading tier, if PCGS assigns a high grade to one of these high dollar coins (perhaps in an upgrade?), then they collect 1% of the value of the coin as a fee in addition to the regular fee for grading.

 

So as an example, for each $10,000 coin PCGS "makes" under this pricing tier, they put $1000 into their coffers.

 

Under those circumstances, why wouldn't PCGS want to *ahem* consider loosening up a bit here and there, if it adds to the bottom line?

[MJ]

I don't know whether anyone has mentioned, it, but there's a seemingly obvious incentive for PCGS to "make" some new high grade / value coins these days. From the PCGS website:

 

*The Guarantee Premium is equal to 1% of the value of the coin in its final grade. The value of the coin is determined by the PCGS Price Guide value for that grade or the Declared Value of the coin, if the Price Guide value is not available. The minimum amount for the Guarantee Premium is $5. PCGS reserves the right to make the final determination of the coin’s value.

 

(reference: http://www.pcgs.com/servicesandfees )

 

In seems like, at this high-value grading tier, if PCGS assigns a high grade to one of these high dollar coins (perhaps in an upgrade?), then they collect 1% of the value of the coin as a fee in addition to the regular fee for grading.

 

So as an example, for each $10,000 coin PCGS "makes" under this pricing tier, they put $1000 into their coffers.

 

Under those circumstances, why wouldn't PCGS want to *ahem* consider loosening up a bit here and there, if it adds to the bottom line?

 

Your math is fuzzy like Mark's ; )

 

Isn't 1% of $10,000 only $100..........and not $1000 as you asserted?

 

A 100K coin would be $1000.

 

Big difference and hardly worth calling out a conflict of interest. Man lots of pebbles in folks shoes around here lately

 

mark

[coinman_23885]

Big difference and hardly worth calling out a conflict of interest.

mark

 

A conflict of interest is a conflict of interest. If there is a pecuniary advantage in awarding a higher grade, regardless of amount, that is problematic in my opinion. Even though it would also theoretically increase liability under the guarantee, PCGS has shown time and time again that it will play games to avoid honoring its guarantee - like retroactively killing the copper color guarantee despite previous promises that color was covered when slabbed, publicly refuting a coin and stating categorically it will not honor it (MS 70 Ike), and stating publicly that any deviation more than two grading intervals would be treated as mechanical errors, etc. The more cynical of us might also argue that grade inflation and evolving grading standards are merely another way to gradually water down the guarantee for coins slabbed a few years ago or more. Of course the latter isn't unique to PCGS.

[MJ]

Big difference and hardly worth calling out a conflict of interest.

mark

 

A conflict of interest is a conflict of interest. If there is a pecuniary advantage in awarding a higher grade, regardless of amount, that is problematic IMHO.

 

But it's not a conflict of interest and James was trying make it one. Just like Mark was attempting to cast shade and failed miserably. They both pooped the bed.

 

Even a million dollar coin "upgrade" would garner only $10,000. Hardly the incentive to muddy your reputation as a public company.

 

Pebble. Shoe. Ax. Grind.

 

mark

[coinman_23885]

Big difference and hardly worth calling out a conflict of interest.

mark

 

A conflict of interest is a conflict of interest. If there is a pecuniary advantage in awarding a higher grade, regardless of amount, that is problematic IMHO.

 

But it's not a conflict of interest and James was trying make it one. Just like Mark was attempting to cast shade and failed miserably. They both pooped the bed.

 

Even a million dollar coin "upgrade" would garner only $10,000. Hardly the incentive to muddy your reputation as a public company.

 

Pebble. Shoe. Ax. Grind.

 

mark

 

You are looking at the effect for a single coin. There are millions of coins that have been certified since the policy started. Even $1 per coin could mean potentially millions of dollars even discounting raw submissions. As for reputation, that ship sailed long ago in my opinion when it began watering down its guarantee and doing so retroactively.

[MJ]

Big difference and hardly worth calling out a conflict of interest.

mark

 

A conflict of interest is a conflict of interest. If there is a pecuniary advantage in awarding a higher grade, regardless of amount, that is problematic IMHO.

 

But it's not a conflict of interest and James was trying make it one. Just like Mark was attempting to cast shade and failed miserably. They both pooped the bed.

 

Even a million dollar coin "upgrade" would garner only $10,000. Hardly the incentive to muddy your reputation as a public company.

 

Pebble. Shoe. Ax. Grind.

 

mark

 

You are looking at the effect for a single coin. There are millions of coins that have been certified since the policy started. Even $1 per coin could mean potentially millions of dollars even discounting raw submissions. As for reputation, that ship sailed long ago in my opinion when it began watering down its guarantee and doing so retroactively.

 

That one coin example I used was a million dollar coin. I stepped out. I showed the math. Since you brought it up I would like to see real math on the "millions " of coins that went through this exact tier and their values and subsequent revenue. I think you are pulling numbers out of the air right now for impact. I think you are way way off. Maybe as much as James.

 

If you really want to check facts seek the reasoning behind the 1% fee and the thought process to get there. Maybe just maybe it's not nefarious, sinister nor conflict of interest . Maybe, just maybe it is just sound business decision and has everything to do in getting the coin In the correct holder the overwhelming majority of the time. Shouldn't that be the goal? If it is then there is no conflict of interest. Just a 1% fee on a high value item. Get it stickered and boom, high value coin in a PCGS holder. A trilogy a collector can live with. Bank. A perfect score.

 

Mark

 

 

 

[coinman_23885]

What is the justification for the 1% fee other than to boost revenue? I don't care if the difference is $1 or a $1,000, the amount made is immaterial, but it is likely quite large in aggregate.

[James_OldeTowne]

Big difference and hardly worth calling out a conflict of interest.

mark

 

A conflict of interest is a conflict of interest. If there is a pecuniary advantage in awarding a higher grade, regardless of amount, that is problematic IMHO.

 

But it's not a conflict of interest and James was trying make it one. Just like Mark was attempting to cast shade and failed miserably. They both pooped the bed.

 

Even a million dollar coin "upgrade" would garner only $10,000. Hardly the incentive to muddy your reputation as a public company.

 

Pebble. Shoe. Ax. Grind.

 

mark

 

You are looking at the effect for a single coin. There are millions of coins that have been certified since the policy started. Even $1 per coin could mean potentially millions of dollars even discounting raw submissions. As for reputation, that ship sailed long ago in my opinion when it began watering down its guarantee and doing so retroactively.

 

That one coin example I used was a million dollar coin. I stepped out. I showed the math. Since you brought it up I would like to see real math on the "millions " of coins that went through this exact tier and their values and subsequent revenue. I think you are pulling numbers out of the air right now for impact. I think you are way way off. Maybe as much as James.

 

If you really want to check facts seek the reasoning behind the 1% fee and the thought process to get there. Maybe just maybe it's not nefarious, sinister nor conflict of interest . Maybe, just maybe it is just sound business decision and has everything to do in getting the coin In the correct holder the overwhelming majority of the time. Shouldn't that be the goal? If it is then there is no conflict of interest. Just a 1% fee on a high value item. Get it stickered and boom, high value coin in a PCGS holder. A trilogy a collector can live with. Bank. A perfect score.

 

Mark

Of course, you are correct. I intended to type $100 on the $10,000 coin (1%).

 

That would be all the more reason to "loosen up", though, right? (more upgrades, more coffer donations).

 

I simply find it disconcerting that "if we hand out a higher grade, we get to charge more in grading fees".

[MarkFeld]

Big difference and hardly worth calling out a conflict of interest.

mark

 

A conflict of interest is a conflict of interest. If there is a pecuniary advantage in awarding a higher grade, regardless of amount, that is problematic IMHO.

 

But it's not a conflict of interest and James was trying make it one. Just like Mark was attempting to cast shade and failed miserably. They both pooped the bed.

 

Even a million dollar coin "upgrade" would garner only $10,000. Hardly the incentive to muddy your reputation as a public company.

 

Pebble. Shoe. Ax. Grind.

 

mark

 

You are looking at the effect for a single coin. There are millions of coins that have been certified since the policy started. Even $1 per coin could mean potentially millions of dollars even discounting raw submissions. As for reputation, that ship sailed long ago in my opinion when it began watering down its guarantee and doing so retroactively.

 

That one coin example I used was a million dollar coin. I stepped out. I showed the math. Since you brought it up I would like to see real math on the "millions " of coins that went through this exact tier and their values and subsequent revenue. I think you are pulling numbers out of the air right now for impact. I think you are way way off. Maybe as much as James.

 

If you really want to check facts seek the reasoning behind the 1% fee and the thought process to get there. Maybe just maybe it's not nefarious, sinister nor conflict of interest . Maybe, just maybe it is just sound business decision and has everything to do in getting the coin In the correct holder the overwhelming majority of the time. Shouldn't that be the goal? If it is then there is no conflict of interest. Just a 1% fee on a high value item. Get it stickered and boom, high value coin in a PCGS holder. A trilogy a collector can live with. Bank. A perfect score.

 

Mark

Of course, you are correct. I intended to type $100 on the $10,000 coin (1%).

 

That would be all the more reason to "loosen up", though, right? (more upgrades, more coffer donations).

 

I simply find it disconcerting that "if we hand out a higher grade, we get to charge more in grading fees".

 

That added fee applies to coins which are crossed, too, I believe.

 

[Mr.Mcknowitall]

The letter(s) have started a conversation among collectors. That is and was the purpose. That is a good thing. Attention has been drawn to the issue by the senior authority in the respective entities. It is long overdue.

 

I would like to see an open conversation between the entities continue, hopefully in a courteous vein, that collectors can also join with courtesy.

 

I would especially enjoy seeing the senior authority @CAC join the conversation.

 

The hobby does not belong to the entities. It belongs to the collectors. Accordingly, the entities should be enthusiastic in addressing the questions and comments of collectors and do so on any and every platform available. Not all collectors use the PCGS and NGC internet platform. The collectors that do are, in my opinion, a significantly lesser percentage than collectors that don't. The entities need to start reaching out. Dealers and auction houses can and will benefit from lively open discussion.

 

There is no such thing as a useless opinion. If somebody thinks so, that is personal bias. It accomplishes nothing and leads to discourtesy.

 

 

[Nutmeg Coin]

If there were systematic grade inflation, or weakening of the ANA grading standards by a major grading service, what would be the remedies? With PCGS guarantee submissions (like the NGC appearance review) running over 3 months what would be your likelihood of success? You make the argument that a coin is over-graded, they say we like it, better luck next time, you are out of luck. I checked the NGC appearance review which looks to be faster than they were at 12 days now: https://www.ngccoin.com/submit/services-fees/ And last time I employed the PCGS guarantee on an obviously puttied coin judged as such by experts like CAC and someone on PCGS' board it took 3 1/2 months even with expedited review.

 

Options would be to have PNG member numismatists write letters of how they see the coin and why they believe the coins are over-graded. If they then balked you would have to go over their heads. They could always refund the disgruntled customer, call them "toxic" and refrain from doing business with them again.

[GoldFinger1969]

This was one of THE BEST articles I have read in my admittedly beginner/intermediate experience as a coin and bullion collector. Thanks for posting it.

 

What I would like to know is if we can make similar claims with regards to some of the more popular, higher face-value coins like Morgan Silver Dollars and Saint-Gaudens DEs. Not only do you get actual coin collectors there, but also quasi-bullion investors, too.

So if you see people gravitating towards some of the more numismatically-premium coins among those 2 coin types and they get burned by a sudden population increase, it could lead to a much bigger "bad taste" than buying SLQ's or Nickles or Dimes or whatever.

 

No sympathy for anybody buying MS70 Moderns with all the extra special language; that's a spec and anybody paying thousands or tens of thousands for coins that inflated multiple-fold is just asking for trouble.

[GoldFinger1969]

Sorry, but I think that is incorrect. I'm no such expert, and over the last few years I've noticed massive population increases (in terms of numbers and percentages) in a multitude of coin types and dates. And in many cases, the grading does not appear to be consistent with what it was a few years ago or longer. I'm by no means, the only one who feels this way.

Mark, any thoughts on population changes among MSDs and Saints ?

 

Do you think the greater overall populations and interest in those 2 coins mitigates to some extent the problem we see with much less-popular coins among the general public (as opposed to coin enthusiasts) like those cited in the article ?

[coinman_23885]

Sorry, but I think that is incorrect. I'm no such expert, and over the last few years I've noticed massive population increases (in terms of numbers and percentages) in a multitude of coin types and dates. And in many cases, the grading does not appear to be consistent with what it was a few years ago or longer. I'm by no means, the only one who feels this way.

Mark, any thoughts on population changes among MSDs and Saints ?

 

Do you think the greater overall populations and interest in those 2 coins mitigates to some extent the problem we see with much less-popular coins among the general public (as opposed to coin enthusiasts) like those cited in the article ?

 

What are "MSDs"?

[Afterword]

If there were systematic grade inflation, or weakening of the ANA grading standards by a major grading service, what would be the remedies? With PCGS guarantee submissions (like the NGC appearance review) running over 3 months what would be your likelihood of success? You make the argument that a coin is over-graded, they say we like it, better luck next time, you are out of luck. I checked the NGC appearance review which looks to be faster than they were at 12 days now: https://www.ngccoin.com/submit/services-fees/ And last time I employed the PCGS guarantee on an obviously puttied coin judged as such by experts like CAC and someone on PCGS' board it took 3 1/2 months even with expedited review.

 

Options would be to have PNG member numismatists write letters of how they see the coin and why they believe the coins are over-graded. If they then balked you would have to go over their heads. They could always refund the disgruntled customer, call them "toxic" and refrain from doing business with them again.

 

 

 

Another option would be to remove the coin from its present holder and resubmit it or submit it to another TPG. From what I have gathered from these message boards, this has been done with coins that are under-graded with some success. The latter, of course, is done with the prospect of making a profit, where as the former would be done solely as a matter of numismatic correctness.

 

The blame for inflated grades is shared by both collectors and the TPGs, when collectors buy or sell what they believe to be over-graded coins.

 

[GoldFinger1969]

1995-W S$1 PF 70 NGCTake a look at this 1995-w PF 70 NGC sold for $12k just few days back, its a steal deal compared to what market demands generally for this coin.

I pointed out sometime a year or more ago that this coin had once sold for $80,000 and lately sales were going begging in the low-$20's.

 

Combination of population increasing and folk realizing it isn't worth it to pay 10-50x FMV for a coin that just happens to complete some arcane definition of a complete set.

 

Salzberg's analysis failed to take into account this sale. If it did, his point will be emphasized more!

I think he wanted to focus on older general circulation coins for the most part.

 

Just pointing out that his analysis is not completely accurate and also a fact that the Coin Market is in deep decline generally.

Why do you say that? Not disagreeing, just want to see what you see.

 

I have several thousands of dollars invested/spent on coins, its for my enjoyment. I am always cautious dropping thousands on top grage hot coins as I see that over last 6 years most of them have come down in price, by even 50%!

Names ?

 

Do you invest in Morgans or Saints ?

I stick to as close as possible to top grade(to avoid super premiums) but good looking ones.

Me too....MS 66's and 67's for some common-date MSD's and MS-65 for some similar common-year or non-rarity Saints.

[GoldFinger1969]

Sure, but to conclude that standards have loosened, I would have to know what the relative numbers were in 2013, the beginning point of the graph. You probably have a number in mind because of your experience, but I would be curious to know what the total graded population was in 2013 and what percentage were PF70 at that time. Same for all examples given.

Looks like the $86K sale was an outlier. That's the problem with 1 or 2 sales at a peak price way away from the market: it's really not a true reflection of supply-and-demand for more liquid, popularly-traded coins.

 

http://www.coinworld.com/news/precious-metals/2013/04/american-eagle-realizes-86-654-in-auction.all.html

[GoldFinger1969]

What are "MSDs"?

Morgan Silver Dollars.......

[MarkFeld]

Sorry, but I think that is incorrect. I'm no such expert, and over the last few years I've noticed massive population increases (in terms of numbers and percentages) in a multitude of coin types and dates. And in many cases, the grading does not appear to be consistent with what it was a few years ago or longer. I'm by no means, the only one who feels this way.

Mark, any thoughts on population changes among MSDs and Saints ?

 

Do you think the greater overall populations and interest in those 2 coins mitigates to some extent the problem we see with much less-popular coins among the general public (as opposed to coin enthusiasts) like those cited in the article ?

 

I'm not sure what "MSDs" are, but even if I knew, I doubt it would change my answers. I believe that in general, there has been continued grade-flation over time. And increased populations in the two series you mentioned do not mitigate the situations with less popular coins.

[LINCOLNMAN]

Are older pop reports available somewhere on the internet? I would like to see for myself if the distribution among grades for the large population coins has changed. There will be a bias because of resubmits, but the bias should be small where the incentives are small.

[GoldFinger1969]

Are older pop reports available somewhere on the internet? I would like to see for myself if the distribution among grades for the large population coins has changed. There will be a bias because of resubmits, but the bias should be small where the incentives are small.

What do you mean....small bias for small incentives ? What coins do you have in mind ?

[physics-fan3.14]

Are older pop reports available somewhere on the internet? I would like to see for myself if the distribution among grades for the large population coins has changed. There will be a bias because of resubmits, but the bias should be small where the incentives are small.

What do you mean....small bias for small incentives ? What coins do you have in mind ?

 

The whole point of a resubmit is to get a higher grade. A higher grade means a higher value. The larger the difference in value, the more motivation there is to resubmit a coin multiple times.

 

Many coins have a relatively flat value - such as generic saints and Libs. The value spread between AU and MS-63/4 is often negligible (only a couple/few hundred dollars). If you get a coin back MS-61, it isn't worth it to spend $50 bucks to regrade it, because even if you get a 63 (highly unlikely), it isn't worth it.

 

Compare that to a high grade key-date Morgan. The difference between 64 and 65 could be thousands of dollars - it is now worth it to resubmit a couple of times in hopes of an upgrade.

[LINCOLNMAN]

"What coins do you have in mind ?"

 

PCGS has graded almost 300,000 1881s Morgans. The listed price difference between a 63 and a 64 is $15. If one were to see a significant shift in the distribution of grades from 63 to 64 over time, to me that would be pretty conclusive evidence that gradeflation is for real for this coin, between those two tiers. Doesn't mean that all coins have experienced this or even that the same is true for 64 to 65 comparisons, 65 to 66 comparisons, etc. but would encourage similar studies. There are many common coins one could look at and even some not so common with small price differences between grades, including grades above 64. Look at enough diverse examples and the evidence would be overwhelming, or not.

[coinman_23885]

"What coins do you have in mind ?"

 

PCGS has graded almost 300,000 1881s Morgans. The listed price difference between a 63 and a 64 is $15. If one were to see a significant shift in the distribution of grades from 63 to 64 over time, to me that would be pretty conclusive evidence that gradeflation is for real for this coin, between those two tiers.

 

Who in their right mine would resubmit an 1881-S Morgan in MS63 with hopes of upgrading it to MS64? There may be very rare exceptions for rare VAMs or monster toners, but this is a very small percentage of the extant population. If you merely mean that the number of 63s coming out in the future would be substantially lower than MS64s, that could also be explained by the fact that few think lower graded uncirculated coins are worth grading. The increase in 64s would largely come from those that cannot grade and were hoping for a gem grade (although promotions could account for a small portion).

[GoldFinger1969]

Compare that to a high grade key-date Morgan. The difference between 64 and 65 could be thousands of dollars - it is now worth it to resubmit a couple of times in hopes of an upgrade.

Gotcha....or some of the FBL Franklins....saw a story on another website (I think I linked to it here sometimes last year; gotta check) where a guy saw a coin he owned but sold get the FBL designation and go up 2 grades AFTER he no longer owned it....value went up like 10-fold I believe.

[LINCOLNMAN]

"The increase in 64s would largely come from those that cannot grade and were hoping for a gem grade (although promotions could account for a small portion)."

 

Good point; however, where the prices and the price differences have remained fairly constant, as they have for the 81s for a number of years, if one saw a shift in relative grade populations over that time period...... I don't think that one could argue that there are relatively more poor graders today than, say 20 years ago. I would also like look at some examples, if they exist, of coins that are worth submitting regardless, but which have weak resubmit incentives.

[Nutmeg Coin]

Numismatic publications have a few articles on the issue. http://www.coinweek.com/opinion/opinion-the-pcgs-and-ngc-dust-up-shows-market-realities/

[MJ]

Good article.

 

I've echoed the same sentiment

 

mark

[Afterword]

“This is just how markets work. And the rare coin market is no different.”

 

 

In other words, the rare coin market is no better than any other market. It is not a very comforting thought, but true. Subprime mortgages anyone?

 

[numisport]

Numismatic publications have a few articles on the issue. http://www.coinweek.com/opinion/opinion-the-pcgs-and-ngc-dust-up-shows-market-realities/

I've cautioned about this a few times before in this forum and I've always assumed this would backfire on PCGS. But maybe this is just a market adjustment. Most importantly one must think hard before buying material from a PCGS 'board of dealers' dealer because that makes you part of the problem [if you think there is a problem]. Yes the perfect example is Ms. Sperber bluntly saying that Newman coins were not marketable in NGC holders. Seriously now, we know what Newman coins look like don't we ? So if we see PCGS coins with Newman pedigree we know we paid more money for same coin just because its in a PCGS holder. IT IS STILL THE SAME COIN AND MAYBE WITH SOME ADDITIONAL SPITTLE. Is it really worth more money for a fourth party opinion ? I for one do not think both grading services are equally to blame for any implied gradeflation. And of course its no secret that an NGC coin can be a better value if carefully selected and that is the bottom line.