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Long Beard's Blog

14 Jan 2022

Grading Interpretations

Coins | Long Beard

Last weeks blog received both the expected and surprising responses. Expected in that most of us, or so those who participate on the ANA website, are true collectors. Meaning, collecting a coin or coins without being graded is generally the manner conducted as opposed to the investor type with deep pockets looking for a maximized profit first and passion for the design or reasoning they exist second. Surprising in that none seemed intent on making a case for graded coins. In either event, the subject of the week is the flip side to the previous. Grading. Enjoy!




Humans are hunter gatherers by nature. As such, we gather and sort out the worse for the better. Coin collecting is no different as we've been doing so as long as they were minted for a multitude of reasons and the one goal of attaining the best possible examples. Over time, each coins condition was assessed a grade from poor to gem. A system which generally worked on a personal level but lacked on the selling end, particularly in the middle grades. What the seller described as a fine often times looked closer to a good to the buyer which in turn affected the sale and the negotiated price. Yet for decades this imperfect system sufficed as coin collecting grew. As such, with coin collecting exploding around the early 20th century, it would take an American psychologist to bring order to chaos. Yet what do we truly know about Dr. William Sheldon, the man who's system has become globally acceptable to both collector and investor? What if we were all wrong in our thinking of the very scale and what it really meant?




Aside from being a highly respected psychologist with his theory on the human physique and personality, he was an author and coin collector. His latest book, Early American Cents (1948) covered the U.S. large cents of 1793-1814 where in a descriptive classification with tables of rarity and value were proposed. As mention, this was at a time when coin popularity had been rising in leaps and bounds, hundreds of dollars were being exchanged based on a system flawed by personal interpretation and this could cost both huge sums of money. The buyer could easily over pay or the seller could just as easily lose. And this is where Dr. Sheldon stepped in with a 70 point system. So why stop at 70? If we pause a moment to reflect on the why he devised the now universal Sheldon Scale the answer begins to present it's self. Pricing, or value based on rarity and grade. What his scale now offered was not, repeat not, one for grading a coin but setting it's value. A scale based on value multipliers. The lowest grade on the scale is a P-01, followed by AG3, Good 4, good 6 and so forth up to mint state 70. With P-01 being the lowest, if a particular coin sold for 1 dollar in said grade then a VG-10 should sell for 10 dollars. So the reality is that Sheldon's scale was not intended to be used as one for grading. Yet in it's early years this scale proved highly useful in the marketplace with values now being transacted very close to his formula.




The rise of third party graders. Counterfeiting of coin and currency is as old as money it's self. Done early on to primarily deceive banks and merchants at face value, with collecting rapidly booming much larger profits were possible from those with ill intent. This had become increasingly alarming in the late 1950's as jewelers began copying smaller gold coins for inclusion as jewelry as Asian smugglers soon began exporting the larger pieces for the same purpose. Aside from their value as bullion, which was equally rising rapidly along side coin collecting, the unscrupulous sort soon realized a $100 necklace could be worth $500 if the "coin" was removed and sold to a collector. The American Numismatic Association (ANA) realized there was a situation of catastrophic proportions in the making as values based on grading were now exceeding the original scale multiplier figures. Collectors were losing not only money but the potential of interest if so unfortunate as to be deceived. With this threat, ANA governor Virgil Hancock along with several staff and writers formed the certification company ANACS in June of 1972 with the sole purpose of detection and authentication. Still, this had not transformed the Sheldon Scale to determine a coins grade. Not until 1977 did the ANA committee address overly and deceptively graded coins with the separate publishing of Official ANA Grading Standards for U.S. Coins based on Sheldon's scale. ANACS was still only authenticating. But the book was a huge hit with collectors and still is to this day.




The birth of the "slab". Since it's inception, certification by ANACS the submitter would receive a photographic copy and assigned information, along with the coin returned in a sealed plastic bag. As depicted in the image, courtesy of forum.collectors.com. While this improved grading, and the ANA's continued education on counterfeit detection bolstered collector confidence, rampant overgrading by sellers and buyers the values were reaching unheard of prices in the market place. With coins once a few hundred dollars in the seventies selling in the thousands by the early eighties, clearly grading had to be made universally acceptable to protect it's value. This became a priority when the Federal Trade Commission investigated several telemarketing firms for blatantly ripping off buyers and investors. The latter being the issue. Those buying not for collecting, but for future profit. In the mid 1980's David Hall had been seeing hundreds of over graded portfolios of would be investors. Realizing the loss through misrepresentation and over grading, still yet to set grading before value as was the case, it would take several meetings with dealers, friends and experts, in February 1986 they former the company Professional Coin Grading Services. The idea was simple. Rather than guarantee a coin with a certificate, each submission would be housed within a tamper proof plastic case with a specific grade based on Sheldon's 70 point scale and then guarantee the assigned grade. With the grade established and backed, now the values could be set more accurately and stabilize the market. The following year, Numismatic Guarantee Corporation joined the explosive third party market.




Outdated? While true the Sheldon Scale has done more to bring order to grading and thereby value of a coin, it has also increased confusion. Not just in the stopping at 70 to denote a flawless example, but the grades in between. Few of us could distinguish, much less understand, a very fine 20 from a 25, 30 or 35. Which are the four grades defining a very-fine. This becomes much more confusing to the beginner. As such, and long before Dr. Sheldon, discussions of a 100 point system date back to at least the early 1900's. But is it possibly, creating a 100 point system that is not only simple within the textual grades but less disruptive to the Sheldon Scale? Well, one man may have that solution. Ron Guth. His scale uses that of Sheldon in it's numbering up to AU58, and adds 80 through 100. His proposal is rather interesting, and feasible. Looking at the current mint state examples, say MS65. Third party graders add pluses and stars to the grade, converting these to a decimal value, in this case MS65+ being 65.5. Based on the Sheldon Scale, MS60 is MS80. The plus would become an 81 and so on until his 70 becomes 100. If you'd like, feel free to visit Expert Numismatics Services, www.expertnumismatics.com for the complete chart and information.





I provided a variety of my personal encapsulations in various grades. I'm fond of the 1976 Kennedy for the grade "gem proof" as this was an actual grade prior to encapsulation and the 60-70 numbering. But I bought all three for the artist's signatures.



Edited 1/16 for clarity.



Many say that if the current grading scale were to change, this would create massive headaches for those with Sheldon graded specimens and open the door for huge profits to third party graders. I would argue the exact opposite. If we compare the two scales side by side, nothing changes but the mint state numbering. The Guth Scale merely drops grades 70 to 69 and replaces the plus/star designations with odd numbers beginning at 81. This means that only if one holding a Sheldon Scale graded coin chooses to resubmit it for grading to the new would the third party profit in that sense. All one needs to do is use the new scale and cross reference it to the old. So an NGC MS70 would be a Guth 100, even without ever adding it to the current encapsulation. Simple as that.




Comments

mrbrklyn

Level 4

The problem with changing the grading system is that A) It is not really necessary and there is no compelling reason to up end 70+ years of literature and history B) Grading is not a continuum so making coins 65.6 or stretching to 100 is misleading, more misleading that the current system. Stars and pluses are for qualities that deny grading, such as fine toning, extraordinary strike in lower grades, or some other quality that deserves a designation in addition to the number. Although we have tried to quantify grading, coin appeal and market value depends equally on factors that don't include just standards of wear on the coin. How that wear is created, or laid out on the coin, as well dozens of other qualities outside the grading descriptions s, affect the value from deep fields, to frosted devices, rim centering, palette qualities, die wear, etc etc etc. The problem isn't the grading system, but the graders themselves and the expectation of a public which misunderstands the meaning of the grade. And this can't be readily fixed, nor would one necessarily want to. That is why the description of coins in auction catalogues are so interesting. Despite being for sales support, they still outline the qualities of a coin that make it unique and special, and these affects prices, especially in auctions. See this David Kahn Morgan, for example: https://www.davidkahnrarecoins.com/1881-cc-morgan-dollar-s-1-ngc-ms64dmpl-cac-123127070.html https://www.davidkahnrarecoins.com/1883-cc-1-morgan-dollar-pcgs-ms64-dmpl-123307137.html Lovely Blog, BTW and I appreciate the effort.

Long Beard

Level 5

David Lawrence also doe a great job of describing a coins grade. On this we agree. Me? I buy the coin, the grade/encapsulation for what it is.

Kepi

Level 6

Really good blog! Beautiful coins! ; )

CheerioCoins

Level 5

A great read! I love all of those coins. Especially the 1932 Quarter and the Wedge Tailed Eagle Australian Silver Bullion Coin. Thanks for the blog!

Long Beard

Level 5

Thanks. The Australian Eagles are going to my niece who collects foreign coinage. I started a registry set of Irish coinage with only top grades in mind for my nephew who has promised to continue the legacy of our bloodline. I posted these on my collections page.

thatcoinguy

Level 5

Interesting!

$tarCollector

Level 4

Great coins in very good condition.

Longstrider

Level 6

Very nice blog and some hot coins to see. I.R. Bama has done some research on the 100 point grading scale as well. Thanks.

AC coin$

Level 6

When I did the blog on Switzerland I did it to follow your suggestions about such coin...and Austria as well. I took You on an imaginary trip to see those beautiful Countries .

Long Beard

Level 5

Appreciate that.

AC coin$

Level 6

Great informative and instructive blog, a guide to us who know little yet about numismatics. To be wise is not precisely to know everything, it really strives on the character of evaluating a coin or item in our case. You do represent a wise individual who seeks the importance of true collecting skills. The eagle coin or medallion is a real beauty, such wonderful bird tied to our nation thru the indian tribes. The Cuban coin holds a spot for a specific point in the history of that island nation. The Morgans have quite attractive datings and present designs for curious eyes. The 1932 quarter represents a very personal item from my own standpoint since that type of coin is my collecting specialty. You made it to the point where I mention a lot a certain type of coins that never get justice from the Red Book or others, but what the coin means when it holds stories even from world wars or other aspects. I try to value and study this type of coins because I know that some collectors from othe places who saw war or conflicts, sooner or later will give the coin its status above standards. You are known for your charisma and kbowledge and you have earned the respect of collectors everywhere. Thanks my friend for sharing this.

Golfer

Level 5

Very nice read. I can't imagine a new or different grading scale. Would be great business for the slabbing companies? Nice coins shown. Thanks.

Mike

Level 7

Counterfeiting will go on. This year they changed the eagle. There is a cut in the rim of the eagle. Compare the two obverses there are a few changes . The reverse also. So they made it harder to copy. There hard to see but there on it. The slabs . N.G.C. because the Smithsonian had them tested by scientists in the field. N.G.C.won hands down. Then the Smithsonian put our country's most valuable and rarest coins about 300 coins in N.G.C. slabs. Thanks for the great read. Its time I start writing again. I enjoy your blogs. There real not cut and paste that's going on so they sound important!

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