About Grading Coins (International Edition)
"A SLIGHT DIFFERENCE IN GRADE CAN BE WORTH THOUSANDS OF DOLLARS..." DOLLAR
By Tom Becker
|JUST MORE PAPER ON THE PILE?
I can think of no single subject in all of numismatics that has had more written about it than coin grading. To the modern collector and investor grading is usually a very important matter. Grading skills seem to be one of the things most numismatists would like to have. Back when I started collecting coins being able to identify and authenticate coins, and to know about them, was more important than knowing how to gauge their preservation.
Is it necessary to understand how coins are graded to enjoy collecting them? The answer must be no. Coins can be studied for historical, cultural, or purely numismatic reasons; and the issue of how well a coin has been preserved, which is what grading measures, may never come up. If we consider numismatics to be a science then grading coins should not be included. It has been proven that grading coins is a highly subjective and changeable art that has predominately commercial implications.
If coins, among collectors, had no significant monetary value then there might be little reason, except for the fun of it, to grade them. Coin grading has very little to do with the study of numismatics. It is only when the commercial side of the hobby is considered that grading becomes critically important.
|WHAT IS GRADING?
Grading is measuring the present condition of a coin to a theoretically perfect example of the same piece. I used theoretical in the above statement because no perfect examples of many coins exist that could be used for comparison purposes. I could be a nitpicker and suggest no perfect coins exist at all. Show me any coin, regardless of the grade, and I can find something wrong with it. When grading, not only are we interested in knowing how a coin of a certain type may rank in comparison to perfection, but also how the coin measures up to all others of it’s kind, and all other coins. Coin grading has established levels of imperfection. It is not enough to say a coin is less than perfect.
Because the condition of a coin can range from being so worn as to be hardly identifiable to as well preserved as the day it dropped from the dies, the coin grader is obliged to categorize very different looking objects. The currently popular grading standard for United States and Canadian coins gives perfection the number 70 and the lowest grade of 1 to a coin in poor condition. If you are new to the hobby you might ask why we don’t grade coins based on a scale of one to ten or use 100 as the top grade and 1 as the lowest. The answer is because the system now used was borrowed from a method of ranking the condition of United States Large cents. The original inventor did not intend for their system to be used for all coins.
The current numerical system we use to grade coins might suggest that there are seventy different grades because there are seventy numbers involved. Actually, the current system doesn’t use all the numbers available because there is apparently no need for some of them, at least when money matters. For example, a coin grader, unless they wish to be unorthodox, can give an Extremely Fine graded coin a numerical grade of EF-40 or EF-45. Someone who decided to use the numbers in between might be asked why they are doing unnecessary hair splitting. Money-wise what does it matter if a coin is graded EF-40 or EF-41? Why is it then that we use every number allocated to the mint state grades, those being MS-60 through MS-70? The answer is because with mint state coins, each slight difference in grade can be measured in monetary terms. Another consideration is that factors not directly linked to grading can have a profound influence on value, especially in the circulated grades. A Large cent that grades but VF may well be considered more desirable and valuable than an EF grade coin that has porous surfaces. A beautifully toned EF coin may be worth more to many collectors than a dull AU example. This is not to say that subjective factors don’t influence the value of uncirculated coins; however, as of this writing an ugly MS-64 grade coin is still most often worth more than a pretty MS-63.
|GRADING EARLY COINS OF THE WORLD.
Numerical grading seems to work quite well for modern coins (to pick a number, let’s say pieces minted during the last three centuries or so), but is, in my opinion, inadequate for coins not produced by modern methods. Numerical grading also doesn’t seem to work in specialized fields where standards have evolved among experienced numismatists to rate and categorize the preservation of what they collect.
|A VISIT TO THE HENHOUSE.
If I asked you to go into the henhouse and bring out the fox I wouldn’t expect you to return and hand me a rooster. There is no mistaking a fox for a chicken. That’s what’s called attribution and authentication. A coin is properly identified and genuine or it’s not. If I asked you to go back into the building and fetch me the oldest hen so we could make some soup, it might take several trips to find the right bird. Guessing the age of chicken isn’t all that easy. Once they reach a certain age most of them look quite alike. Ninety-nine percent of coin grading is based on one’s ability to detect subtle differences between very similar looking coins.
|BEAUTY IS IN THE EYE OF THE BEHOLDER, COIN GRADING ISN’T.
Even experienced coin collectors often tend to confuse the attractiveness of a coin with the grade. When judging something as nebulous as beauty each of us is entitled to our opinion, and even if we may not happen to be part of the majority our opinion remains valid. This cannot be the case when grading coins. If there is no such thing as a right or wrong grade then we have no standards. It is the fact that slight differences in grade can have a profound effect on values that adds validity to the grading system we use. An undergraded coin is easily sold to any of a number of anxious buyers. A overgraded coin finds no takers amongst experienced coin graders.
|WHAT DOES HOW WELL SOMETHING WAS MADE HAVE TO DO WITH THE GRADE?
If we are going to have a grading system that has any meaning at all then it must measure just one thing, preservation. I was once told by a collector that he didn’t think any coin should be graded MS-65 or better unless the piece was fully struck. “What if no fully struck examples were ever minted?” I asked. How well a coin was struck can have a profound effect of the desirability and value, but it has nothing to do with how well a coin has been preserved since leaving the mint.
|CONFUSING SUBJECTIVE FACTORS WITH GRADING MEASURES.
If the customer had stated that instead of being fully struck a MS-65 grade coin must not have any heavy bagmarks, I would have completely agreed with him. The vast majority of collectors I have met want to own the best preserved coins they can afford; and it is universally accepted that the best preserved coins are those that have survived in a condition as close to when they left the mint as possible. Most collectors of anything consider well-preserved examples to be the most desirable. Many popular hobbies have developed formal grading systems. Others have grading standards that are not as well documented but as important. An old pine table in its original finish with no replacements or repairs is considered more desirable, and often much more valuable, than one with lengthened legs and spray-painted black.
The collector of early world coins often has an important decision to make. Do they allow preservation alone to dominate or does the overall quality of the coin matter most? It is not unreasonable for the collector to want it all—pristine condition combined with a sharp strike and outstanding eye appeal. The collector of early coins soon discovers such a combination can be prohibitively rare or non-existent and so some compromises must be made. These compromises should be left to the individual and not incorporated as part of the grade.
|THE GOOD-BAD-AND UGLY.
The person who is new to coin grading will often make the mistake of confusing the appearance of a coin with its grade. It is important to remember that grading deals only with preservation. It is entirely possible to have a coin that deserves a high grade but would be considered by most collectors to be ugly. (I was once offered an English hammered penny that was absolutely as struck, however the striking was so blundered one could only guess at the attribution.) The opposite is also possible. It is this second possibility that creates the greatest problems for the novice grader. Coins may be cleaned or otherwise altered to make them “attractive” to the beginner who wrongly presumes that anything so bright and shiny must be uncirculated. The terminology we use when describing coins can be misleading. Most of the time when we say something is very good it is considered to be better than average. A coin graded Very Good is less than an average specimen when measured against perfection. Based on the numerical scale we use with 70 as perfection and 1 as the lowest grade, then a Very Good coin is either an 8 or a 10. It is not until we reach the grade Very Fine-35 that a coin numerically becomes the “average” grade.
|HORSESHOES AND COIN GRADING.
I have never encountered anyone with perfect grading skills, nor is such perfection expected. On the one hand we are dealing with a grading system offering very precise ways to measure preservation, and yet we are willing to admit there can be some room for opinion as well as error. How can this be? Experienced numismatists realize that since human beings are doing the grading there are bound to be some differences of opinion and outright mistakes. Those who are critical of the grading services correctly point out that the same coin submitted to a grading service at different times can be given different grades. What they fail to mention is such cases are the exception rather than the rule, and often the difference in grade is no more than one point on the grading scale.
|MY FIRST GRADING TEST
When I applied for my first job as a numismatist I was given a grading test. A dozen very different types of coins were placed on a velvet pad in front of me. At the time numerical grading was not in use so I had fewer possible grades to choose from and less chance for error. After the test I was given my score. I had graded 8 of the coins exactly as my future employers had. In two cases I called an AU coin EF. Honestly, I figured they were AU but thought it wise to be conservative. In one case I called a weakly struck 1808 Bust half-dollar VG when it was really a VF. I had confused the weakness of the strike with wear. My greatest mistake occurred when I graded a silver dollar as uncirculated when it was really a Choice AU with light friction on the high points. Despite these rather glaring errors I was given the job. My new employers could see I had acquired basic grading skills. I just needed some fine-tuning.
|GRADING IS OFTEN DECIDING WHAT IT’S NOT.
Perhaps the easiest grading determination is to decide if a coin in uncirculated. A coin having any wear, even the slightest friction, cannot be uncirculated, period. I have always been puzzled because slight wear counts for so much and heavy marks, even cuts, called bagmarks, are found to be acceptable on uncirculated coins. If grading is to measure how well a coin has survived since the moment it was minted, why is damage caused while coins were being transported or stored any different than marks occurring after a coin “officially” entered circulation? I could place the reeded edge of one silver dollar on the flat surface of another and by tapping the top coin with a hammer create a “bagmark”. Such a defect would not keep the coin from still being uncirculated. If I rubbed the coin vigorously with a dry paper towel chances are while the damage is very slight, the coin would now be considered circulated.
|ARE THE SUJECTIVE FACTORS REALLY ALL THAT SUBJECTIVE?
During my years in the coin business I have found that coin collectors have remarkably similar and very predictable tastes. While I believe that grading is only a measure of preservation, there is no denying that subjective factors can influence how we grade coins. A heavy bagmark on the cheek of the monarch is offensive to most collectors. A coin with this type of defect is more likely to be given a lower grade than a piece having an even larger mark well hidden in the devices. Most of us tend to give lower grades to weakly struck coins or to ones having overly deep or unattractive toning. If we do technically miss the mark and undergrade the coin, most collectors would forgive us because the piece is considered by many to be undesirable.
The grading standards we use for coins today are not the same standards in place fifteen years ago. We now have more grades. When I first became a professional numismatist numerical grading was not used. Not long ago I purchased a small, but nice collection that had been assembled in the mid 1970’s. The coins were graded as Choice Extremely Fine, Choice BU and Gem BU. The owner of these coins was an experienced collector and a skilled grader. In my opinion, all the coins were correctly graded using the terms and measures of the time. When I received the coins back from a grading service the Choice EF pieces were graded EF-45. The Choice BU coins were mostly MS-63. Many of the coins called Gems were given the MS-64 grade, with an occasional MS-65.
In the past it was common practice to reduce the grade of a coin with defects. Rather than calling a coin EF-45, with rim nick, the piece might be offered as a VF with no mention of the flaw. A piece that had been lightly cleaned might be reduced a full grade or more. Now the trend is to grade the coin correctly and mention major flaws or cleaning. This is the way it should be done.
What I find somewhat disturbing is the move in the direction of increasingly precise standards for the grading of uncirculated coins. Logic would suggest that for each difference in grade there should be a corresponding difference in value. A coin graded MS-63.5 should be worth more than one given a MS-63 grade. As grading becomes more precise the tendency is to make more than just the state of preservation part of the grade. What results is a bewildering number of possibilities and options. Would you prefer to buy a coin that has an average strike and average luster or a well-struck example with less than average luster? Every experienced numismatist has a checklist of likes and dislikes. I think it is far better, for everyone involved, to leave these questions up to the individual rather than trying to answer them as part of the grade.
For it to work, a grading system must apply to all coins. It would be wrong to have one set of standards to measure inexpensive mint state coins and a more precise scale for mint state coins valued at $1000 or more. We should give as much time and attention to grading a coin worth $10 as one worth $10,000. This seldom happens.
What has taken place, and I consider a positive development, is that collectors now have specialized knowledge available about many series of coins. This enables everyone from the collector of ancient coins on up to learn about and appreciate how grading should be applied to their specialized area of interest.
The experienced collector of German Church and City Talers minted in the 1600’s looks at these coins differently than when viewing the Empire coinage. Both are coins and yet that is about where the similarity ends. It may well be that a coin minted in 1662 and one produced in 1962 are deserving of the same technical grade, but the appearance of the coins may be very different.
As one becomes more skilled at grading coins the less important grading becomes. Decisions once agonized over are now made at a glance. Suggestions about the grade of a coin that were once whispered are now emphatically stated. Once grading skills are acquired it becomes obvious that the grade of a coin is merely the starting point from which we determine if we will purchase it or not. The beginning grader might rely heavily on the opinion of a grading service or fellow numismatists. The beginner might wrongly assume that once the question of the grade has been resolved nothing else matters. The skilled grader knows better.
|IT’S EASIER TO REVIEW ANOTHER GRADER’S WORK THEN TO DO IT YOURSELF.
What if I handed you a box of 100 coins that I had just graded and asked you pick out those you thought were over or undergraded. I think you could complete this task much faster than if I asked you to grade, from scratch, 100 “raw” coins. Those who criticize the various grading services correctly note it is not unusual for any of these services to grade the same coin differently when examined at different times. Coin grading has always been this way. I think the most skilled and experienced coin graders would readily admit they have changed their mind concerning the grade of coins on many occasions. When expert graders revise their opinion concerning a coin the change is often slight.
|A SLIGHT DIFFERENCE IN GRADE CAN BE WORTH THOUSANDS OF DOLLARS.
It is rather difficult to grade coins without considering the monetary implications of what you are doing. Grading and money go together. If I were to sell you a coin as a F-15 and it was called a F-12 by several grading services you might not be pleased with me, but I think you would be far more upset if the three point discrepancy had involved a coin graded MS-65 that was later found to be a MS-62. Certainly anyone who is trying to acquire grading skills should, after becoming basically familiar with the system, concentrate their first efforts on those areas of grading most applicable to their interests. For example, if you collect early French copper and bronze coins you would be far more interested in learning how to grade circulated coins than someone who was building a set of George VI Canadian quarters. Simply put, you need to know what you are looking at to be able to properly grade it.
|ARE ALL COINS GRADED BY THE SAME STANDARDS?
In theory we have one grading standard that is used to grade all coins, therefore, any coin graded MS-60 is just like any other coin deserving the same grade, regardless of what type of coin it may be. It this was true then having learned how to grade one series of coins we could grade them all. Such is not the case. Anyone who doubts this is in for a big surprise. Based on my personal experience, I have reached the unpopular conclusion that grading is done based on comparisons of like kind pieces. Modern coins are graded more conservatively than earlier issues because many of them are quite common in uncirculated condition and as collectors we have the luxury of being more discriminating. I have reached these conclusions after examining, grading, and selling many thousands of coins.
When grading disputes occur they are often resolved by referring to other coins of the same type. If you were trying to prove that the silver dollar you had just graded as MS-65 really did deserve this grade would it help your argument any by showing me a MS-65 nickel? Rather, what you would do is to make side-by-side comparisons with other dollars. To convince me the 1752 Mexican 8 Reales you are holding is About Uncirculated would you compare it to an British sovereign? So perhaps all coins aren’t graded alike. For those who are determined to standardize things this may be a disappointment. For experienced numismatists it is something we’ve known all along.
Let’s suppose we developed a new grading system where it was a rule that any coins having a total of five or more bagmarks 1/8 inch or longer in size would automatically be given a MS-60 or lower grade. A coin with four or less marks of this size would be graded MS-61 or better. By comparison to the system we now use to grade coins such as silver dollars and larger denominations the new grading system would be seen as quite conservative. If these same standards were applied when grading small coins the coin could be virtually defaced with marks and still be graded MS-61 or better!
| WHAT DOES UNCIRCULATED REALLY MEAN?
Let’s suppose I was walking down the street and noticed a cent lying on the sidewalk. I carefully pick the bright and shiny coin up by the edges and wrap it in a tissue. When I get home I send it off to a grading service. In a few weeks it is returned to me graded MS-63. How can this be? Obviously the coin didn’t magically drop from the mint’s dies onto the street. Someone, perhaps several people, must have handled the coin before I found it and thus, in the strict sense of the word, the piece had circulated.
I once reviewed a group of silver dollars that was the property of a bank. The coins had been shipped to the institution in the original mint bags. Each year a bank employee had unsealed the bags and, one by one, counted the coins! These pieces had been handled dozens of times by perhaps dozens of different people, but in the strict sense of the word they were uncirculated.
Almost all coins struck by a mint for circulation, this is, business strikes as opposed to proof issues, that have survived in close to perfect condition have done so totally by accident, not by design. Making coins involves mass production. Coins bang against one another. They are dumped into metal hoppers and run through counting machines into bags. The bags are heavy. Transporting the coins naturally rubs them together. At banks the coins are again run through machines and mechanically stuffed into rolls. Many times, when I look at a nearly flawless old coin I wonder, how could this have happened, what with all the odds being against it?
It has only been recently, perhaps during the last 200 years, that those who make coins have given any thought to those who collect them. Being allowed to produce coins and have them accepted as money has always been serious business. Any entity producing coins would take pride in their work and do the best possible job. But I think it is fair to assume that in most cases production comes first. Often, if a coin was of the right weight it left the mint. That the piece hadn’t been well struck on a nicely prepared planchet wasn’t that important.
I once submitted to a grading service a group of 1953 U.S. proof sets. Each set was still sealed in the original mint box. I made a special arrangement with the grading service. They were to open the boxes, remove the half dollar, and grade it. A grading service employee would be the first person to handle the coin since it left the mint. When the coins were returned to me in the grading service holders of the fifty pieces six were graded as PR-67. Eleven coins were graded PR-66. The rest were given the PR-65 grade. How could this happen? The coins, according to the Mint, were specially struck for collectors. I seem to remember photos of Mint employees wearing cotton gloves as they carefully packaged these sets. How could a coin that was carefully produced to please collectors and had been carefully packaged with the collector in mind be less then perfect? Why were some of these coins just three points on the grading scale less than perfect and others had dropped by a full five points? When I asked this question of the grading service they responded by saying it was not unusual, back then, for coins to have been improperly handled by Mint employees. What the blazes could they have done to them! Have we who grade coins set impossible standards? When grading proof or business strike coins in grades above MS-65, has the grading of these pieces become just a game? On both counts I think the answer is yes.
The quickest and easiest way to increase the value of a coin is to raise its grade. Let’s suppose collector demand for coins and market conditions were such that there were only two coin grades. A coin is considered new or used. Because there were just two grades there would be only two prices. Anyone who attempted to get a collector or investor to pay a premium for an especially nice new or used coin would find no takers. I think many of us who are involved in the commercial side of numismatics have benefited greatly because of the complexity of the grading system we use. We have done nothing to simplify the procedure because doing so would not be in our best interest. As we allow the grading system to become increasingly complex new opportunities to profit are created. For example, suppose there was no MS-64 grade. At one time, when numerical grading was in place and was a working system, this was the case. A coin could be properly graded as MS-63 or MS-65. When it became a common practice to start grading coins MS-64 and the pricing guides began listing values for this grade which coins do you think became included in this grade? Did some MS-65 get regraded downward? Perhaps, but I think it is much more likely some once MS-63 coins were now called MS-64 and thus immediately increased in value. For as long as I have been involved in the coin business differences in grade resulted in differences in value. I have never seen an advertisement offering coins in several different grades at the same price. I’m certain if there were suddenly fifty different grades of mint state coins the business side of the hobby would find a way to use all of them!
Creating different grades and placing great monetary value on a slight difference in condition will only work in an expanding market where values are generally rising or at least the trend is toward higher prices. As the values of the very highest grade pieces rise room is created for the others to move as well, like opening the bellows of an accordion to their full length. When the coin market, like the accordion, becomes compressed the differences in values between the grades are forced closer. The supply of coins in each grade can also have a major influence on values. Grading service population reports have had a major influence on coin values. This data has often confirmed the suspected scarcity of certain coins. In other cases we have learned the supply of some coins in certain grades is larger than previously thought.
|LOOKING AT EARLY COINS AND HOW THEY ARE SOLD.
This is a report on grading, but it makes sense to consider how many world coins are marketed to collectors. Often the dealer and customer develop a method where the collector views the coins and some discussion about the piece occurs. At coin shows, where the customer can inspect the coins, the issue of grading may not even be discussed. The customer either likes the coin and feels it is worth the asking price or not.
I have known several European dealers who intentionally used very conservative grading standards. This does not mean they sell coins for less than they are worth.
In many cases the early coins offered for sale represent unusual opportunities. It may be impossible to compare what is being offered to the same type of coin available elsewhere. Like kind items may come on the market infrequently and the collector must decide if this coin, regardless of the technical grade, is something they want in their collection.
|TWO LEFT FEET AND NO RHYTHM.
I have seen enough variation in grading skills among experienced coin dealers to have reached the conclusion that some people are better coin graders than others. Some numismatists seem to have a knack for grading coins and for others it is a struggle. For the most part, a good grader has the ability to detect small, sometimes minute, differences in coins with great consistency. Consistency is the key. Perhaps the greatest fault anyone can have, who grades coins, is inconsistency. One minute they are calling a coin a MS-65 and the next a MS-63.
|A GOOD GRADER KNOWS WHY.
A skilled grader is much like a person who is adept as detecting counterfeits. They are both able to clearly explain how they reached their conclusion. Just saying, “Because I said so.” Is not good enough. As a youngster, I was able to rapidly improve my grading skills because other collectors and dealers would take the time to explain why one coin was given a certain grade and another did not qualify for that same grade. Certainly part of learning how to grade coins will involve some trial and error. Having someone take the time to explain your errors will greatly reduce the trial period.
|WHEN GRADING THERE CAN BE THREE RIGHT ANSWERS TO THE SAME QUESTION.
A coin can be correctly graded and be one that just makes the grade. The piece can be typical for the grade or it can just miss qualifying for a higher grade. A person who is considered to have correct, but conservative standards would often drop the first piece down a grade and keep the one that just missed being better in the grade. The person with liberal, but still correct, standards would do just the opposite.
|THE ULTIMATE TEST OF YOUR GRADING SKILLS.
Coin collecting can be a very individual and creative endeavor. You can collect as you please and, if you’re prepared to not complain about the consequences, you are free to follow any grading standards you wish. If you choose to be hyper-conservative then you will find few coins of a particular grade that please you. If your grading standards are too liberal then you will seldom see any coins, because of the grade, you don’t like.
When grading coins the goal is to get the grade right. To be conservative or liberal when grading coins indicates to me a lack of experience or an ulterior motive. In the majority of cases I have encountered the purpose for grading a coin had to do with justifying the asking price. As an active participant in many hobbies I have found that people with things to sell offer evidence to the buyer in hopes of substantiating the price. Grading coins is no different.
|HOW THE MARGIN OF ERROR AND CHANGING STANDARDS IMPACT YOU.
In the first pages of this report I quickly reviewed a variety of topics that might suggest grading coins is not as precise as the system seems and that grading standards are subject to change. Most importantly, the value and salability of a coin is not only influenced by the grade. What I have not addressed is a simple question that concerns the great majority of collectors and investors. How can I make sure the coins I am buying will be given the same grades when I want to sell? There is no absolute way this can be done. Not being able to locate a buyer who will grade your coins the same as when they were sold to you is one of the major risks associated with the purchase of rare coins. Furthermore, it must be remembered that how a potential buyer grades your coins doesn’t matter if the price offered is not acceptable. Suppose you were to offer me an 1946 Canadian dollar that was graded by PCGS as MS-63. After examining the coin, I agree that it is a lovely specimen and indeed a solid MS-63. I then proceed to offer you $100 for the coin, which is supposed to be currently worth more than $300. That I agreed with the grade means nothing.
You then offer me an 1870 No LCW half dollar that has quite clean surfaces and very attractive toning. You purchased the coin as an EF-40 but my eyes detect enough wear to call the coin no better than a VF-35. Your asking price is $2500. I wouldn’t normally pay this much for a coin grading VF-35 but it is such an outstanding specimen I go ahead and make the purchase. Did our disagreement concerning the grade make it impossible to do business?
In the past when the coin market was booming and demand was strong, grading standards tended to become more liberal. Chances were good that if the first person trying to do business didn’t agree with the grade someone in the long line behind them would. When business was slow and demand for coins was off grading standards tended to become more conservative. I think we can expect this to happen in the future. It would also be prudent to assume that grading standards will be different ten years from now. During the five decades I have been involved in the coin business we have gone from adjectival grading to numerical and then new numerical grades were established. It is probably reasonable to assume decimal grading, that being MS-63.5 etc., will be the next innovation. If you predict the system used to grade coins will become simplified, you had better be very young and hope to live a long life if you expect to see it happen.
|BUY UNDER THE OLD STANDARDS AND SELL BY THE NEW.
Recently I reviewed a small collection of coins that was assembled prior to 1960. The coins were stored in the small brown paper envelopes that were a popular way to house coins at the time. The only grading information written on the holders indicated the coins were uncirculated. As I examined each coin I assigned a “new” grade to the pieces based on current grading standards. Among the coins I found items I felt were MS-63 quality, a few MS-64 grade coins, and one piece I was sure would get a MS-65 grade from any grading service. If I had graded and evaluated the coins as simply uncirculated, or MS-60 by current standards, the lot would have been worth about $10,000. Thanks to today’s more precise standards the coins were easily worth three times that amount!
|WOULD YOU VOTE FOR MY NEW GRADING STANDARDS?
The grading standards we currently use for coins are in place because they work. I doubt anyone would suggest that we have a perfect grading system, but because many thousands of numismatists use the current standards they must be considered acceptable. For the standards to be changed a credible and powerful force, or the majority of people who buy and sell graded coins, would need to believe a change was actually in their best interest. As our example hopefully illustrated, many collectors have benefited from increasingly precise grading standards. I doubt reverting to a standard having far fewer grades would be a popular choice, as it would mean many coins of previously different values would be lumped together.
|THE STANDARDS MAY STAY THE SAME BUT TASTES MIGHT CHANGE.
For a good number of years condition has tended to overshadow rarity. Collectors have shown a willingness to pay huge premiums for rather common coins in uncommonly nice condition. This trend developed as large numbers of new participants became active in the marketplace. Condition seems to be a much easier concept to grasp than rarity. There is no denying that those investors who bought high-grade coins made some impressive profits. Condition has, up until quite recently, outperformed rarity. Will this trend continue? I see a trend in the direction of giving coins more recognition based on their rarity or scarcity while allowing condition to remain an important consideration. How is that for a hedge? A track record of proven rarity within a grade is what we are looking for. Value is a secondary condition, while keeping in mind that, at least for now, the majority of coin buyers are still chasing coins in the highest grades.
|WHAT ABOUT THE AVERAGE COLLECTOR?
Suggesting you might have done well had you spent $35,000 or more for a coin is advise that would interest only a tiny percentage of the people who collect or invest in coins. It has been my experience that the majority of people who participate in the coin market have far less money to spend or are unwilling to make such a substantial investment in a single coin. What can the average collector do to use the grading system to their advantage or to protect themselves from becoming a victim of the system?
1. Learn to grade coins. I have found that the quickest way to develop grading skills is to deal with one series of coins at a time and to make side-by-side comparisons. I have found that large size coins are easier to grade than small ones. If you are very new to the hobby, and coin grading, you may want to begin your grading lesson by studying uncirculated silver dollars or other crown size coins if for no other reason than there are lots of them available to look at. Many collectors make the mistake of trying to learn how to grade many different coins at once and this can lead to major confusion. The new grader soon learns that different types of coins deserving the same grade can look very different.
Aside from making comparisons of coins it is important to understand what you are comparing. For instance, in the Morgan dollar series there are certain issues, such as the 1892-O and 1893-CC, which often come weakly, struck. This striking weakness shows up above Liberty’s ear and has often been confused by the novice as being wear. Each different type of coin has a place, or places on the surface that shows the first signs of wear. It is important to know where to look to determine if a coin that otherwise appears to be uncirculated really is so.
Don’t try to accomplish too much at once. You will find it much easier to distinguish the difference between a MS-65 silver dollar and one graded MS-66 if you first learn to tell the difference between a MS-60, a MS-63, and a MS-65.
Developing good grading skills requires lots of time and effort. Furthermore, unless you regularly examine coins your grading ability can become “rusty”. I wish I could say that learning to grade coins is simple, but this is a publication intended to deal with the truth.
2. Avoid buying grade sensitive coins. By giving this advise I’m suggesting you can somewhat reduce the need to have good grading skills if you avoid situations where you must use them. Some might criticize this advice by saying it’s the chicken’s way out. I think if more chickens did this fewer of them would end up being plucked! All of us can understand the risks associated with buying an expensive coin and many of us avoid such situations by not spending a great deal of money on any single coin. Isn’t buying a coin in the MS-65 grade for twice what a MS-64 would cost incurring the same kind of risk?
As an investor, won’t buying coins that are not of the highest grades eliminate any chance of making big profits? In most any endeavor it is expected that some of what we learn is gained through experience. Betting on your grading skills can be a very high stakes game. If it was your first trip to Las Vegas would you take every cent you brought with you and bet in on one spin of the Roulette wheel?
|PROVING THE INSIGNIFICANCE OF GRADING.
Are all coins of the same grade equally desirable? If I offered to let you choose from a dozen MS-65 examples of the same date silver dollar would you rather let me pick one for you or do you think you could find a coin in the group you would like to have more than any of the others? The shortcoming of coin grading is it’s purpose is to place groups of coins in rather precise categories while being obliged to ignore that among experienced numismatists each coin is judged on it’s own merit and each judge may have different tastes and preferences.
Prior to the popularity of third party grading I think most of us talked about a coin’s grade but when it came to buying and selling grading was only another thing on our checklist that influenced our decision to buy or pass on a certain coin.
|BABY TALK AND COIN GRADING.
An infant learns to talk by mimicking the sounds of others or by accidentally making a sound someone recognizes as a word. After countless repetitions of sounds the baby learns to talk. A child that never came into contact with other people would never learn a language. Coin grading is much the same.
Several excellent books, and numerous articles, have been written on the subject of coin grading and all are worth reading. Becoming familiar with grading terminology and other aspects of the art will give you a basic foundation on which to build your skills. The next step is to carefully examine coins that have been graded by others. Two excellent places to do this are at coin shows and coin club meetings. Most coin collectors tend to believe one set of grading standards applies to all coins. A silver dollar, George VI nickel, and early Large cent are all graded in the same way. I have found that because of the difference in the way they are made, the metallic content, and the size of the coin this is actually not the case. A mark that might be considered small on a dollar would be a much more noticeable flaw were it found on the surface of a Five Cent Silver piece. Coins with complex raised devices covering most of the surface area will often show fewer marks than pieces with generally flat surfaces on which marks are much more noticeable. Many early coins have striking deficiencies that can be confused with wear. All coins have certain areas of the surface that are studied to detect the first signs of wear. If I were to show you fifty different types of coins, all correctly graded as MS-60, I’m fairly sure you would find the coins to look quite different. For me, the best way to learn to grade coins is to concentrate on one group of like kind pieces. Once comfortable with that group it’s time to move on to another challenge.
|YOU HAVE TO HAVE SEEN ONE TO KNOW ONE.
Many expert graders can correctly determine the condition of a coin at a glance. It takes only an instant to check their mental grading set and compare the coin they are examining to all others they have seen in the past. If you are new to coin grading then your grading set may have some missing pieces. When I was a young collector an older friend suggested it would be time well spent if I carefully studied the choice and gem quality coins displayed for sale or in exhibits at coin shows. Knowing what the best coins looked like would help me compare their image to what I might be thinking of adding to my collection.
|THE GRADER’S RESPONSIBILITY TO BE RIGHT.
Several times in this report I have mentioned it is not unusual for a skilled graders to change their opinion about the grade of a coin or for experienced graders to express different opinions. What if, as a dealer I sell you a coin graded as MS-65 and then when you wish to sell it back to me I change my mind and grade the same piece MS-64? This change of opinion can be easily expressed in money--money that came from your pocket. How would you react if this happened to you? Coin grading works because the majority of people who view a coin give it the same grade. If I ask ten experienced coin graders to examine a coin and eight of them call it MS-65 it matters little that one person called the coin MS-64 and the other thought the piece was a MS-66. By George, the coin is a MS-65 and that’s that! If you show the coin that I sold you as MS-65 to a number of skilled graders and they think it is a MS-64 then I was wrong- Pure and simple. Some discussion of my competence is in order.
As a collector or investor you are allowed to adopt any grading standards you wish. As a dealer, I don’t have this right. I could intentionally undergrade everything I sell but I would soon be out of business unless I adjusted my prices upward and charged according to the true grade. Does it really matter if I’m Mr. Conservative and charge $65 for a coin I call MS-62 or Mr. Bargain Barn and only $65 for a MS-64 when both of us are really selling a coin that properly graded is a MS-63?
It has been my experience that most collectors who proclaim to be conservative graders change their standards and get with the program when it’s time to sell. I don’t blame anyone for trying to buy low and sell high. I wish I could do more of it myself. Adopting conservative grading standards is a valuable aid in reaching this goal when you are buying.
I once stood across a bourse table from a collector of copper coins who had nothing good to say about the grading services. He was attracted to a Large cent I had on display but took exception to the PCGS grade of MS-63. He felt the coin was only a nice AU. If I was prepared to sell the piece, based on its “real” grade he would take it off my hands for $120. His offer was a very fair one were the coin really AU. Since I had paid about $200 for the coin I wasn’t quite ready to toss the grading service’s ability to grade like pieces, and $80, into the dumpster. I had agreed with the grading service’s opinion when I bought the coin.
The collector, after making a facial expression that indicated that he was tired of dealing with incompetents like me, suggested that if I wanted a quick lesson in learning how to properly grade Canadian Large cents I might stop by the table he was sharing with three other collector/dealers.
“Let’s go,” I said.
I pulled the coin that he wanted to buy from my display case and followed him down the aisle. When I got to his booth the other people he was sharing with were all in attendance.
“Your friend offered me $120 for this overgraded coin,” I said. “Can any of you sell me one that looks the same for $150?”
I didn’t buy a coin.
|COIN GRADING -- DIFFERENCE BETWEEN DEALERS AND COLLECTORS.
As a dealer I must conform to the grading standards of my customers, otherwise I would soon be out of business. The collector is under no such obligation. What does it matter if, as a collector, the silver dollar I bought is a MS-63 instead of a MS-64? I think the coin is a beauty and it fits perfectly in my set. I want to keep it forever. Truthfully, this seldom happens. I have found that most collectors are just as concerned about how the next person will react to what they are buying as I am. It has been my experience that the modern collector holds coins for less time than their predecessors. Today’s collector often acknowledges that they will be selling coins before they even buy them!
|ARE WE ALL SLAVES TO THE GRADING SYSTEM?
Earlier, I mentioned that I have never fully understood why a coin that has slight friction on the high points is automatically valued at considerably less than a technically uncirculated piece that has heavy bag marks and other detracting features. It seems to me that this element of the grading system creates a wonderful opportunity for the true collector.
Heaven forbid it should happen, but could we someday have grades like MS-63R, the R standing for rub? I seriously doubt this will happen. I’m very sure that the grading system we will be using in the future will continue to classify coins that have the slightest friction as lesser quality.
I once purchased a collection that had been bought as uncirculated but ended up being sold as circulated because the coins were improperly stored. The person who owned the collection had kept the pieces loose in paper envelopes. He constantly examining the coins, showed them to others, and displaying them at shows. This careless handling had made some coins “shopworn”. The toning was still beautiful, the surfaces were free of marks, save for just enough friction on the high points to deserve AU grades from the grading services.
Putting aside the technical grade for a moment, these coins had far better eye appeal than most of the uncirculated pieces I have encountered; yet they were worth far less. It must be said that AU grade coins probably don’t offer the investment potential that has been historically available when buying mint state pieces. The value associated with collecting and owning aesthetically appealing coins cannot only be expressed in money and thus the grading system we use has created a magnificent loophole for numismatists.
|IF I WERE STARTING OVER AGAIN.
I strongly recommend that everyone become a skilled grader of coins. After more than thirty years of experience I know this won’t happen. To be more practical, I would suggest you only buy coins you feel competent to grade and avoid buying coins for which you are paying a large premium for a slight difference in condition. If I were beginning a collection these days I think I would tip the balance in the direction of rarity while at the same time realizing the importance condition plays. I would pay close attention to what was available in the AU grades. When purchasing mint state coins I always ask the question, “If I buy the next highest grade will I be getting a coin that is substantially better?” There is little doubt that a MS-65 example of a Morgan dollar is noticeably better looking than one grading MS-60. Can the same be said every time we compare a MS-64 to a MS-65? As a collector, if you can’t see the difference in quality then why should you be paying for it?
|JUST MORE PAGES OF PAPER
I have found this a rather difficult report to write. The topic of coin grading is very complex and one that seems to be filled with more exceptions than rules. The subject must deal with the very human part of numismatics. The seller tends to see what they are trying to sell in the best possible light. The buyer looks carefully for every defect. A slight difference in grade can sometimes be expressed in thousands of dollars. When money is involved are we all capable of resisting the temptation to overgrade a coin, just a little? The popularly accepted and used grading standards are not carved in stone. They have changed in the past and may change again. Market conditions affect the way we grade coins. In theory we use one set of grading standards to grade all coins. I have found that the some coins are actually graded by more liberal or conservative standards. If all of this sounds confusing then join the crowd. There are many challenges available in numismatics and grading coins is certainly one of them.
If you have any questions or comments about this article please contact me at: www.tombeckeronline.com
By Tom Becker © 2001 All rights reserved
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