I have written this little blurb for the prospective purchaser to use to understand my position on the grading of US and World coins. I have done this as an aid to the buyer - to minimize surprises when you receive the coins purchased from me. I have also included my personal commentary on coin grading and the coin market based on my 40+ year involvement with US and World coins.
After well over 50 years of developing and codifying US coin grading standards, there is still a high degree of confusion within the US coin market. Notwithstanding this confusion there are different standards in use for grading US and World coins - different and competing standards for use with US coins and a fairly uniform standard for World coins that has little or no confusion. I will attempt to clarify and provide my interpretation of each.
With the advent of e-commerce coin pictures are easily accessible. However, digital pictures can only display so much information about a coin and particularly its condition. Coins that are scanned are typically washed-out, i.e., unable to show the state of luster and hence, distinction between a high circulated and uncirculated coin is difficult at best. Scans also limit detail in the horizontal axis due to the nature of the scanning technology. Pictures taken with digital cameras must have the coin held obliquely in order to avoid reflections, but this introduces problems. For instance, hairlines and other surface conditions can be hidden or manipulated with reflections. Additionally, photo editing software can 'doctor' all types of images whether photographed or scanned. So even with the best attempt to convey coin images, it is still important to understand both the technics and aesthetics of coin grading.
US Coins
1. The Technical Grade
The last word on coin grading will always be elusive due to the subjective nature of defining and applying any type of standard. Furthermore, coin collectors (buyers) and 'coin industry' people (predominantly sellers) are at odds. Each have differing financial objectives. Simply put, the seller wants to sell at ever increasing amounts and the buyer wants to buy as inexpensively as possible in a market with as stable a price structure as possible. Like any market, the coin market moves in cycles. This movement includes obviously both pricing but also grading as well, i. e., grade inflation or loosening of standards suits the coin dealer just fine as it helps to even out cash flows by being able to sell lower quality coins for more. On the other hand, the collector wants stability in grading because they want to have matched sets of say the same grade or 'look' and they want to know how much the elusive piece will cost. In this type of environment, it is easy to see why coin collecting is fraught with obstacles for the new collector. Unfortunately there is little advice as the caveat emptor label reigns supreme and many new collectors quickly become discouraged when they feel they have paid far more than what it is worth. The mania over slabbed coins too is a poor substitute for grading. Just wait and see when the market reaches its apex and takes a nosedive grades will become tighter and say MS-65 grades will only be liquid at MS-64 price levels - or pehaps less. A whole mass of collectors and dealers with top tier certified coins will get burned.
Within the past couple years, several fine articles in Coin World showed how far apart are some of the popular third party grading services with respect to grading the same (identical) coins (see the May 26 and June 2, 2003 issues and the excellent follow-up commentaries by readers and others). Still, the old adage - 'buy the coin not the holder' - holds true especially with the concept of 'market' grading appearing to be gaining widespread acceptance as truly original coins (unfussed) become scarcer each year (note: 'market grading' was introduced in the 1990's by ANACS, a division of Amos Press). It is truly anyone's guess what the future of the rare coin market holds, but if the past can be seen as a likely precedent, grading standards will continue to erode in a downward trend as 'coin sharks' and 'coin industry' leaders attempt to fleece another generation of collectors. These major players have manipulated the market by revolutionizing standards and other hobby protocols for their own profit - instead of refining systems to educate and point out the vagaries as learned via developing and contributing to a body of numismatic scholarship. If these major 'coin industry' players viewed numismatics in this way they could remove the fear of knowledge for the new collector as well as make the market more secure for those to stay actively involved as buyers and as a direct consequence, the collector base too, would increase and so too profitablity. Also, don't expect computerized coin grading to be a panacea. This too has been attempted a couple of decades ago, but just has how anyone values the system - read programs it - well one persons detracting nick on the cheek will be worth one demerit on the Sheldon scale and someone else will give it two. So, the best advice I can offer the sincere collector is to understand what the coin should look like before you even see it. Go to coin shows, visit dealer's stores, join a local coin club and view on-line seller's websites to survey what say an AU-55 and 58 early S mint Morgan dollar should look like before shelling out several hundred or more dollars. This principle basically holds true with all machine struck coins from any country as well.
Where I stand with respect to grading US coins is as follows. As a long-time collector, weaned on a finely evolved system of grading - introduced around 1960 or so by Mssrs. Brown & Dunn - I became aware of the grading issue only when James F. Ruddy's 1970 book titled "Photograde" made its appearance on the scene. I personally didn't think there was a grading problem or issue because to me the B & D system was acceptable for grading circulated coins and I understood, say for instance, that an AU coin (a split grade back then) was a very choice EF (XF) just shy of making the uncirculated grade. Back then, and as I still believe today, this trivialization of grading by Ruddy was a blasphemous work which commenced the erosion of grading standards by liberalizing grades in a wholesale manner - all to the benefit of the 'coin industry' leaders (mostly dealers). Ruddy profited enormously from this work. Messrs. Brown and Dunn - whose system had evolved out of a proto-standard first alluded to by Wayte Raymond, B. Max Mehl and others of this generation, was basically thrown-out in wholesale fashion. Simply put, the "Photograde" system, introduced by a dealer, commenced the erosion of grades. For example, now a VF coin (one with a moderate level of even wear throughout the fields and devices) overnight became an EF (XF) coin! The once moderately and evenly circulated coin was now 'improved' to what was formerly the domain of only lustrous coins - the mighty EF (XF) grade. Price trends of course did not adjust to compensate for this change in standard. With hindsight, how could anyone object - dealers saw the value of their sales increase and collectors alike saw the value of their holdings increase. In retrospect, was this not an attempt to prolong the mid-1960's bull market in coins into the early 1970's? To me it was, and is all a sad joke perpetrated by the 'coin industry' leaders, 'coin-sharks', 'hustlers' and 'coin survivalists' that we see repeated over and over again every decade or so as the coin market gyrates with the latest and greatest of scams and conspiracies. If you doubt what I am saying, then let me ask you why has "Photograde" undergone something like 18 editions since first published and most of these changes have occurred after being designated an official grading guide of the ANA in 1972? Is this not primary evidence of market manipulation?
Presently we see PCGS both grading and trading (read - 'the fox guarding the chicken coop') under the umbrella of Coin Universe, Inc. Essentially, PCGS is no longer a true third party because they have lost their objectivity in the marketplace as they have a vested interest in the value of what they grade, but not after first craftily establishing their place in the market and building their credibility as the premier grading service by actually upholding a fairly high and consistent standard for a number of years. Today, I see more improperly graded (and occasionally attributed) garbage in PCGS holders than I saw in the old PCGS green slab series of just a few years ago. The biggest farce - and unfortunately one that will prevent the long-term and next generation growth in serious coin collecting as a hobby - rather than as a scheme to obtain quick riches - is typified by the PCGS price trends. Such trends are always at unrealistic levels. This dual role of PCGS - one of a supposedly neutral and unbiased third party grader and one with vested interest in the upward trend in coin prices - is now supported by and colluded to by a network of dealers supporting their grading role and profiting from price inflation above and beyond what all the other commonly used price trends report. Is this again not some form of market manipulation? Should not the Federal Trade Commission, Interstate Commerce Commission, SEC (parent company is a publically traded security), several state attorney generals in a class action type of suit or some other major regulatory body who has jurisdiction in this type of scandalous behavior investigate this perversion of the marketplace? Instead we see major players in the 'coin industry', including significant persons in the decrepit ANA and PNG (sold to the highest bidder) play trivial games like numismatic character assassination and denouncing second and a wholesale attack on third tier grading companies. Clearly, the 'coin industry' is unable to police itself due to unmitigated greed. It is this failure that will likely cause the current market cycle to falter when enough coin collectors just decide to stop buying due to all the shenanigans going on and dump their coins into a very thinly capitalized market.
I grade using about a decade old official ANA grading guidebook (Grading Standards for United States Coins, 4th edition). I have disregarded Photograde entirely even though it is also an 'official' grading guide of the ANA as there are numerous inconsistancies with the ANA book. In grading, I take into consideration the pattern of wear as evident by the strike and relief as commonly understood by those coin authorities who have contributed immensely to coin collecting - such as the Late Walter Breen and other specialists - who have far more knowledge about a particular coin and series than I would ever have. For mint state coins I have found James Halperin's book How to Grade U.S. Coins: A step-by-step guide to the grading of uncirculated and proof coins to be immensely helpful. With the ANA grading guide, Breen's massive tome and Halperin's study one has an excellent foundation to learn how to grade US coins.
2. The aesthetic or 'eye appeal' grade
Every coin either looks right for the grade or it doesn't. This is an immutable fact that is fundamental and axiomatic to any standard. Any coin that does not visually appear proper for its wear and environmental susceptibility has been tampered. Most tampering has been done by those who have attempted to 'improve' its looks. Any coin that is not original - and that includes dipped coins - should be discounted from the published market price trend. How a coin looks is far more important in determining its value than its technical grade because quite simply a coin that 'looks right' will sell far more quickly to knowledgeable collectors than will one that just technically makes the grade. All 19th Century silver coins should be toned or even black. If not - it is not original, and hence, is a coin that has been played with or 'doctored'.
A high percentage of US coins are doctored to improve their appearance. Artificial toning, whizzing (mechanical polishing with an abrasive bit to simulate luster), dipping to remove toning, oiling, scrubbing, electrolysis, ultrasonic cleaning, solvent cleaning and a zillion other basement and laboratory methods are used. With my coins I try to state what is obvious and what isn't so anyone with or without a tremendous amount of coin knowledge will know what to expect. After all, to know 'what a coin should look like' takes many years and viewing hundreds of thousands of coins. So many coins that have been 'fussed' with reside in PCGS & NGC holders that dealers will not offer a sight unseen price anymore, and if and when they do it is well below Greysheet bid.
A doctored coin by the way is not always bad. As numismatists, we have a responsibility to conserve the artifacts of commerce for the next generation. Say for instance, on heavily patinated copper or bronze coins with deleterious amounts of corrosion and/or verdigris, they can and should have the corrosion and/or verdigris arrested and/or ideally removed. Corrosion and verdigris are processes that destroy metal (see Durst Publications for an interesting book on coin preservation and techniques on arresting some of these active deleterious processes). Verdigris is akin to a copper cancer and no serious collector in their right mind should view it as acceptable if found to be active. Over time and under high humidity (approx. 70% and greater), this type of corrosion will lead to a loss of metal (pitting), loss of detail and essentially a coin worth-less had the process been arrested or stabilized. Collectors of ancient coins know all about this. To arrest it and ideally remove it, even if it leaves visible pits, is far better than allowing it to remain on the coin. Also PVC is deleterious to the surface of the coin. It is especially dangerous to the luster on high circulated, mint state and proof coins. PVC chemically reacts with the metal to change its composition by dulling the surface. I usually remove PVC with non-toxic solvents. If the PVC has been in contact with the coin too long, the surface will be permanently impaired. Any coin in a soft vinyl or cheap plastic holder should be immediately removed, have the surfaces removed of the PVC residue and placed in archival, non-plasticizing agent (rigid) flips, mylar holders, or polyethylene bags. High grade coins too should not be stored for long-term in plastic sleeve holders. Even though the plastic (usually acetate) and acid-free cardboard will not normally affect the coin, the potential for friction by the sliding sleeve and play due to the hole tolerance will cause light surface hairlines on the highest points of the coin. Whitman and Dansco albums are best for storing circulated coins, yet people use them all the time oftentimes just to obtain the nice orange-blue toning the materials impart to the coins after having been stored for many years.
World Coins
Because the market for World coins is larger than the US, coin prices tend to be more stable (i.e., its decentralized nature with more collectors and capitalization) with much less attempts to manipulate it than the US market. As an example, for instance, just today I read in the PCGS newsletter that a sale of as little of 300 MS-63 generic and very common twenty-dollar gold pieces is enough to change the price trends for this type of coin! The international market for World coins is more susceptable to exchange rate fluctuations. With a currently weaker dollar foreigners tend to buy up World coins in the US, but have a more difficult time selling into the US and hence, a lack of new material tends to drive the US market for World coins downwards.
When it comes to grading of World coins, basically, most European countries have their own evolved standards - which Krause & Mishler have coordinated and clarified (see their massive guidebooks on world coins). The standard is quite clear, concise and not a numerical grading standard. I suggest you read it and use it because it is basically what the rest of the World is using to grade coins - and the rest of the World is in the drivers seat when it comes to World coins. I uphold the following grading criteria which is derived from this standard: 1) Fine - the coin must have full rims, but allowances are made for off center strikes, weak strikes, uncollared strikes and hammered coins, 2) Very Fine - all details present, luster in devices, fairly uniform wear on the high spots - a very nice looking coin, 3) Extremely Fine (XF) - must be lustrous throughout fields and devices and have a maximum of 10% wear on the highest points (a very beautiful coin which does not translate into any third party US grading standard as I've seen these coins graded anywhere from Ch. Au to MS 65), 4) AU - only the slightest impairment of luster, or 'rub' on the highest devices and, 5. AU/UNC - fully lustrous, may be toned, may be baggy or may have perfect surfaces. Many AU/UNC coins I assign this grade to do not have the eye appeal of UNC coins as may be suggested by improper storage or blotchy toning (no PVC or encrustation). Nevertheless, an AU or AU/UNC world coin is a beautiful coin and many third party grading services, including those in the top tier, will assign anything from an AU 58 to even an MS 65 or even 66 grade.
I do not trust the US third party grading services when it comes to grading World coins. I believe they grade prejudicially by imposing US standards. Additionally, they are just too ignorant of the vagaries of these coins. Take for instance, your typical Napoleon I 20 franc coin in a top tier US third party certified AU grade. I see loads of them on the Internet. Too many are dull, worn with highly impaired luster and with fields full of chatter that if compared to a US five dollar gold piece assigned with the equivalent grade would be laughed at and given a grade of VF 30 at most. Remember, know what the coin should look like at the grade you desire before you invest your hard earned bucks and especially don't pay AU or MS price trend type money for a top tier certified coin at the level assigned. Additionally, a top tier grading company assigned grade of say MS-63 is also generally worthy of no more than approx. the UNC price trend in the latest world coin catalogs. 'Coin hustlers' would like to make the naive collector believe they are getting something superior and worth much more than an UNC coin at an UNC published price. This is all blarney, don't pay more than an UNC published price unless it is a true gem coin (or you personally know it is undervalued by the price trends).
In short, remember US coin grading standards are not transferable because World coins are graded to a stricter standard. For instance, all coins graded using a US standard like the ANA official standard that would meet say the "EF-40" grade would only be a standard 'VF' and the 'EF-45' is a 'Ch. VF' or 'gVF' (good VF) as the British say using the common world coin grading standard as described by Krause and Mishler. The best third party grading service for World coins I have found is ICCS (in Canada) - forget PCGS and NGC, both of them often have a hard time telling a circulated coin from one that is not.
Summary
Coin grading is both an art and science. It takes time to learn the scientific aspect by viewing thousands of coins using the tools and resources of the trade (magnifiers, specialized publications, knowledge of experts and now informative websites on the subject coin series). One cannot determine - much less verify the grade of a coin with just a quick glance - as some professional numismatists claim and/or even without a hand-held magnifier, because it takes a learned skill in both observation (opinion-free) and assessment (application of knowledge) to arrive at a conclusion based on pure objectivity.
'Net grading' and 'market grading' are just poor excuses for not understanding how to apply criteria in describing a coin's condition both when struck and what happened to it after it left the mint. 'Net grading' is an attempt by 'coin industry' hustlers to make damaged coins appear more palatable to the buying public - especially with all the mania over slabs. Furthermore, 'net graded' coins never sell for the so-called 'net grade'. For the dealer, they are always more difficult to liquidate. With the mania over slabbing anything and everything, the dealer thinks he can con the collector because - voila it's slabbed - and hence, is more desirable to a gullable and naive collector!!! For instance, I'll take a popular, scarce and problem-free legitimately graded in accordance with the ANA standard of VF-35 1893-S Morgan Dollar at a fair price (raw or in any certified holder) any day over an AU-50 detail one which 'nets' at EF-40 at the same price in an ANACS holder. This type of grading - the quick and easy way out of not understanding how to grade - but in just applying labels to make material more liquid. A 'net' graded coin is a problem coin that always must be heavily discounted. 'Market grading' is highly volatile based upon the price trend (read supply and demand) and the where the grader stands relative to the coin business. A 'market grade' assigned coin is highly volatile as the market for it expands and shrinks with its thin degree of capitalization. For instance, when the coin market is booming with nearly every type of coin being highly liquid the standard becomes relaxed and viceversa when one can barely find a buyer at any price level. I stay away from both 'net' and 'market' graded types of coins unless: 1) I know that there are less than 100 known in existence at all grade levels, there is a long-term trend in demand and 2) I can get it for a fraction of its value in the 'net' grade, 3) it has eye appeal in that there is still a facsimile of originality in its appearance and 4) most importantly, I have a ready and willing buyer who understands and appreciates the coin for what it is.
What good do third party grading services provide? With 'instant' liquidity of a coin out - not much anymore...perhaps authentication, but even the experience of the learned is far better than one whoose primary objective is to assign a grade. One word of advice, there are no shortcuts to numismatics - LEARN.