Wednesday, March 22, 2017

Are Third Party Graders something to fear?



Did you know that coin professionals are afraid of Third Party Graders? Strange, right?

I came to this realization while in the process of outlining the coin book I am writing. I wanted to include a bit about the theory that TPGs exercise some degree of control over coin values through their certified dealers. I asked nine coin pros (I think they all sell coins to some degree, but all make money from numismatics) for their input on the TPG controlling the coin market theory. What better way to arrive at my own conclusion than by consulting those whose opinions I trust? Of the nine people asked, one was willing to talk about it.

Yes. You saw that correctly. One person was willing to talk about whether TPGs might have influence over coin values. No one responded with, "I've never heard that," or,
"What are you talking about?" They flat out did not want to give me their input because I was going to write about it.


What is so god damned scary about TPGs? How deep does their control, or the perception of control, of the hobby run if coin dealers are not even willing to openly entertain the idea that these companies hold a certain amount of sway over prices.

So, I will press on with this theory alone. The theory goes:

Prior to the existence of TPGs, unscrupulous dealers could get away with over grading and charging unsuspecting buyers whatever they wanted. People who didn't know better were getting screwed. Numismatics was dangerous territory for newcomers. At least, that's the story we hear. I was four years old when the first TPG began operation, I have no idea what the coin market was like. It could have been a pirate's paradise of cheating and lies, who knows!

Regardless, TPGs sprang into being to claim their destiny as the sheriffs of numismatics. (Please keep in mind, TPGs were begun by coin dealers. Who better to police the hobby than people with a vested interest in making coin selling more profitable for dealers?) Did they use their new increased position of power and tight affiliation with large coin dealers to control the market? Probably. If the stories of the coin market pre-TPGs is true, the market needed some controlling. And while TPGs may help large dealers turn a better profit than they could otherwise (with "condition rarities" and 36 flavors of superfluity such as First Strike, FB, FH, FS, +, etc.,) no one is forcing people to buy.

I don't buy many graded coins. I feel my money is better spent on raw coins that cost less and are just as genuine as those found in sealed plastic holders. I mean, we buy the coin, not the holder, right? And I absolutely do not endlessly submit nice modern coins one after another, after another, after another, after another, hoping for an MS-70 designation. I know a waste of money when I see one. The difference between MS-69 and MS-70 is negligible. The concept of a "perfect" coin was created (won't say by whom), it's as artificial as condition rarities.

Anyway, TPGs create a price guide for their own graded coins. TPG certified dealers sell the graded coins at roughly the values indicated in the TPG price guide. As the values in the guides slowly rise, so do coin prices. If the prices in the guides reflect actual market conditions, there's no foul play. If they are 100% made up, that's bad. Although, even if they were 100% fabricated (I sincerely doubt that's the case - so many values move with metals prices), once enough people pay a certain amount for a coin, that is the coin's value; even if the number was pulled from out of the ether.

So, getting back to where I began, why are dealers afraid of TPGs? Is it their willingness to litigate? Let's be honest, TPGs are not strangers to a courtroom. Whether trying to sue "coin doctors" or being sued over alleged unethical practices, they know their way around the legal system. And the average dealer, squeaking out a living on the crappy margins coins bring for all but the largest companies, can't afford to even consider talking to a writer about an idea because of whom it might offend.

We shouldn't be afraid to share ideas. If TPGs have nothing to be ashamed of, they should welcome open discussion.

If you want to fix numismatics, start there.

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