 
Grading Changes, Pricing Irregularities:
What is a Collector (or an Investor) to Do?
by David L. Ganz
Column 11 - March 9, 2000
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We are all custodians of our collections for but a limited time. It may be for the whole of our lifetime, but at some point in time, the collection is disposed of, either by us or by our heirs. Even the great collections, such as John Work Garrett, or Byron Reed, which went into a museum collection, presumably for perpetuity, ultimately return to the marketplace.
Whenever the disposition of a collection transpires, and increasingly, before that point in time, the collection is typically evaluated. That usually brings to the forefront the issue of several items being other than what the owner thought they were -- either by reason of grade, price, or authenticity.
Today, it is not uncommon in viewing a collection put together in the late 1970's or early 1980's to find coins whose grading description simply no longer corresponds with what the marketplace would grade the coin in terms of a verbal description or a price.
There are those who would argue, incorrectly in my view, that this is a contemporary program that is a result of a high-flying market, and too few coins to satisfy the demand for increasingly picky collectors. History shows, however, that it was not that uncommon in bygone times, either.
More than 37 years ago, the late Abe Kosoff, who pioneered the American Numismatic Association's efforts in the grading field, catalogued the Lahrman collection, including a 1793 large cent, Sheldon variety S-11a.
He had sold the same coin earlier in the Oscar Pearl collection (1944) where he had graded it as Fine-12. In 1963, he referred to the earlier grade and said it was "now" termed "Fine-15".
Disagreements on grading are not uncommon, either. At one time, Paramount, Superior, and Stack's all sold the identical specimen of an 1870-CC double eagle -- which all agreed was the finest known -- except that Stack's called it about uncirculated, Superior termed it XF-45 and Paramount thought it to be XF-40.
The coin had not appreciably changed its condition in between; the order of auction showed it went to Stack's as AU (equivalent, say, to 55), then to Superior (45), Paramount (40), and then back to Stack's who stuck with their original about uncirculated grade (equivalent to, say, 55).
(Bob Arnel, a New York and later North Carolina collector who made something of a specialty of Carson City Mint coinage, told me that having viewed the coin, he thought it was simply "struck circulated" by the Mint, meaning that the coin was uncirculated, but looked worn). Having viewed the coin, I must concur that the coin, though it looked worn, in fact was a truly un-circulated coin.
Of course, that was then, and this is now, and today, instead of dismissing the grading distinctions as reasonable among experts, more and more collectors are turning to the courts as a means of seeking redress for the problems in their collections.
In some instances, the courts have been sympathetic and awarded substantial damages for the misgrading of coinage. Where it has been systematic, the Federal Trade Commission has successfully obtained substantial consumer redress.
But in other instances, the case brought by the disgruntled consumer has fallen apart as it moves towards trial, principally because the collector doesn't have the ability to explain the distinctions in grading, or how and why it differs between experts.
It can be devastating when an expert is asked in Court whether or not they know how to grade a coin, and then match their expertise with that of a grading service, or for that matter, other experts.
In one case brought by the Federal Trade Commission (FTC v Security Rare Coin & Bullion Corp., 1989 US Dist. Lexis 15958, 1989 Westlaw 134002 [DCt Minn. 1989], aff'd 931 F2d 1312 [8th Cir. 1991]), the government's own experts disagreed with each other on 19 of 34 coins that were examined -- in some cases by several points on the 70 point Sheldon grading scale.
If you think you've been ripped off, long before you talk to a lawyer, or take the tact of litigating, it is worth your while to spend some time with a professional dealer to get an opinion that you can utilize later.
Usually, a written opinion is a good place to start, particularly if it specifies the coins that are examined, and provides the following other points for comparison:
Date, type, mintmark and distinguishing features
Grade or other description (as sold)
Acquisition price
Price the coin was worth at time of purchase relative to other similar pieces in the marketplace
Current grading opinion of expert
Current market price for comparable piece
Estimated value if coin were graded in acquisition grade
Calculated difference (loss) if any.
These are the fundamental elements of ascertaining whether or not you have a valid claim -- and one, which is possibly worth pursuing. If your expert can't comfortably fit it into this parameter, it is a tough case to prove that the coins sold didn't meet the grade.
To be sure, there will always be those who will argue that grading standards in 1985-6 changed dramatically -- and this is true enough, to a point.
Let's take a look and see just what it is that you ought to be looking at when considering whether grading of coins you hold is a long-term problem, or one in which you were seriously taken advantage of.
Grading is an attempt to quantify, and describe, the various states of preservation (or condition) that a coin is in. It is not uniform; whether numerical descriptions or their adjectival counterparts are utilized, they differ from person to person, dealer to dealer, buyer to buyer, and seller to seller.
Many coins acquired by typical investors, and collectors, are called "uncirculated" coins. Respected commentators do not agree on how to describe differing types of uncirculated coins. Doty's The MacMillan Encyclopedic Dictionary of Numismatics (1982), refers to "MS-65s, sometimes called 'choice uncirculateds,'... [which] will command much higher prices than MS-60s...." (p. 151). In Rare Coin Investment Strategy (1986), Scott Travers terms "Choice Mint State-65" the "most frequently traded investor-quality coin", utilizing the same standards that are employed by the American Numismatic Association's grading standards, but then goes on to state (p. 21) that "Although A.N.A. grading standards indicate that an MS-65 may be lightly fingermarked, the marketplace often dictates that MS-65 be virtually mark-free * * * Although A.N.A. standards indicate otherwise, an MS-65 is generally expected to exhibit all of the detail that the Mint intended it to display * * *"
In Mort Reed's book, Coins: An Investors & Collector's Guide (1973), James F. Ruddy was invited to contribute a chapter on coin grading and noted (p. 324) that "Certain early coins are extremely difficult to find in Uncirculated condition without any bagmarks or handling. Such flawless pieces are sometimes designated as Choice Uncirculated or Gem Uncirculated. Choice describes an above average Uncirculated specimen, well struck and with a minimum of minor bagmarks or minting defects. Gem Uncirculated is the finest available, a sharply struck coin that is free of the usual minor bagmarks or minting defects."
In Penny Whimsy, (1958) Dr. Sheldon (who, after all, invented the numerical grading scale) said something that differed from all of this. "The MS-65 is a coin that would be a perfect MS-70 except for some small minor blemish. It may lack full mint luster, or some microscopic or almost negligible blemish may be demonstrable. There may be a spot of discoloration, a fingermark or a barely discernible nick" (p. 37).
A later writer, James Halperin, in the N.C.I. Grading Guide (1986) notes that "choice" uncirculated is utilized by the ANA to denote coins that are MS-65 or Proof-65, however he also notes that "Many dealers apply the terms to MS/Proof-63 and call MS/Proof-65 coins 'gem'".
Thus, even the adjectives are not precise and have different meanings.
Jeffrey J. Pritchard in Heads You Win, Tails You Win: The Inside Secrets of Rare Coin Investing (1983) simply sums up prevailing opinion when he states (p. 39) that grading of uncirculated coins "remains somewhat arbitrary, even among so-called experts."
The latest "Official Guide to Coin Grading and Counterfeit Detection" PCGS Grading Guide (1997) uses better defined verbiage and numbers (and even specifies it as to coin denominations and series), but in the final analysis, it is yet one more opinion from a panel of acknowledged experts - with which others can disagree.
Because of this, grading differences are best summed up by Q. David Bowers, in Adventures with Rare Coins p. 259 (1979):
"Often five different sellers will assign five different grades to the same coin, perhaps differing just slightly but still differing, often with important financial consequences* * * As the evaluation of the grade or condition of a coin is a largely subjective matter, experts can legitimately differ* * *
The problem can be seen in pricing guides, as well, where grading guidelines have been published, only to change within the same periodical over time. For example, Coin Dealer Newsletter, (the "grey sheet") in 1979, termed a coin that was MS-60 as "average unc-they may have bag marks or handling marks (but no wear) and may not have full luster". At the same time, they called MS-65 coins "choice fully struck specimens without detracting marks-they may be brilliant or have original toning".
By December 1982, the Coin Dealer Newsletter was using different language. It called the MS-60 coins in the same manner as it did before, but now termed MS-63 as "coins may have minor marks or have slight weakness of strike-they are 'choice' rather than 'gem'". MS-65 was now termed "well struck with a minimum of abrasions-they may be brilliant or have original toning".
How is it, then, that coin grade descriptions, and hence opinions, can differ?
Grading, is inherently subjective and represents one person's view as to its state of preservation, and, if uncirculated, the degree or extent of pleasure (eye appeal) that it beholds to the purveyor.
The principal problem with numerical grading, of course, is that it gives the impression of exactitude and precision and it is, in the final analysis, little more than a subjective view of the cataloger. An article that I wrote in Numismatic News Weekly in 1975 explained it thusly: "standards, no matter how precisely defined, nonetheless remain subjective. Differences of opinion--not only between collectors and dealers, but even between dealers themselves, are bound to arise". ("Under the Glass", Numismatic News Weekly, September 20, 1975, page 28).
The ANA Grading Guide, itself, argues that "grading is not that precise and using such finely split intermediate grades is imparting a degree of accuracy, which probably will not be able to be verified by other numismatists."
From this, it should be clear that there is neither a unified grading standard, nor some single subjective grading standard that can be utilized. There are, instead, multiple grading standards, each of which are somewhat inconsistent with the other.
There are some that believe that there is a uniform standard. C. E. Bunnell, of Rochester, New York, is one who advocated a uniform grading standard in the following letter:
It is very important to members of the ANA that the Board of Governors take some stand with reference to issuing some kind of statement classifying coins so that all dealers that catalogue and sell coins * * * must use the same classification. * * *
(Letter to the editor, The Numismatist, monthly journal of the American Numismatic Association, published February, 1913, p. 81).
Put another way, the issue has been with the coin industry for a very, very long time and will continue for the foreseeable future.
Certainly, in my own collection, I have representative pieces purchased from major auction houses in the late 1970's and early 1980's as MS-65 that, by today's standards, don't even make MS-63. They are what they are, and were what they were.
But I also have a remarkable 1894 proof dime that Julian Leidman sold me in 1978 or 1979, graded proof-64 -- a long time before that grade was in popular use, and definitely before it was priced in any periodical or publication.
Julian used this as a shorthand code for a coin that wasn't quite a 65, but was a lot better than a proof-63. A couple of years ago, I decided to see what time had done to this piece and submitted it to the Amos Numismatic Certification Service (ANACS). To my surprise, the grade held: proof-64.
As Benjamin Franklin said, referring to my profession, but now ascribed to another, "Behold! A coin dealer. An Honest Man!"
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David L. Ganz
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