THE 10 GREATEST MYTHS OF ‘SLABBED’ COINS

in Articles, Coin Grading

THE 10 GREATEST MYTHS OF ‘SLABBED’ COINS

By SCOTT A. TRAVERS

COPYRIGHT © 1994, 2003 BY SCOTT A. TRAVERS
ALL RIGHTS RESERVED.

1869-S_50c_ms67_eliasberg “Independent third-party certification and
encapsulation.”
It’s quite a mouthful to say, and it’s every bit as
important as it sounds. Simply stated, “slabbing” has
revolutionized the rare coin market, fundamentally changing
the way people buy and sell coins.

Since its introduction in 1986 by the Professional Coin
Grading Service (PCGS), slabbing–the encapsulation of coins
in sonically sealed, hard plastic holders–has greatly
diminished the grading controversy that plagued the market
prior to that time. It also has eased the crisis of
confidence that up to then was spreading insidiously through
the marketplace. Today, there is widespread acceptance of the
grades assigned to rare coins by PCGS and other leading
certification services–notably the Numismatic Guaranty
Corporation of America (NGC) and ANACS.
But while the Slab Revolution has been a tremendous
blessing, it also has given rise to a number of
misconceptions–some of them downright myths–among the coin-
buying public. Some of these have even been perpetrated, or
perpetuated, by members of the numismatic press–the very
journalists whose knowledge, integrity and independence serve
as security blankets for their readers.
Some of these misconceptions are fairly obvious; others
are much more subtle. But either way, a myth is as good as a
mile.
Here, then, is my list of the 10 greatest myths about
slabbing:
*****
MYTH NO. 1: You can’t get ripped off when you buy a
certified coin.
This is absolutely not the case: You can get a terrible
deal on any kind of coin if you choose the wrong dealer.
Certified coins offer important safeguards. First and
foremost, they carry grades assigned to them by impartial
experts–informed, independent assessments regarding their
level of preservation–and these provide protection against
overgrading by unscrupulous sellers. It’s up to the consumer,
though, to correlate this grade with a reliable price guide
stating how much each coin is worth in the designated level
of preservation.
In one recent case, a coin dealership grossly
overcharged customers for coins which had been certified by
major grading services. The grading itself was fine, and many
of the coins were extremely rare and highly desirable. The
problem was, the dealer priced the coins at multiples of
their fair market value. Just because a coin is accurately
graded, that doesn’t mean it’s fairly priced.
We’ve also seen scams in recent years in which high-
grade modern proof coins … post-1964 Jefferson nickels
graded Proof-68 or Proof-69, for example … have been sold
for hundreds of dollars based on their exceptional level of
preservation–when, in fact, they’re encountered routinely in
such grades and might well be worth very little. NGC
took an important stance in this regard by refusing to
certify many late-date proof coins, but later lifted the ban.
Scams have also occurred in connection with esoteric
coins which have been certified–unusual pattern coins, for
example. Often, these coins fall into gray areas and people
have difficulty determining their value. You might have a
coin of which only three examples have been independently
certified–but that doesn’t necessarily mean that it’s worth
a great deal of money.
You need to do your homework–your research–in order to
establish the fair market value of any coins you’re
interested in buying. Just because a coin has been
independently certified, that doesn’t mean it’s a good value.
The first step in protecting yourself as a consumer is to get
the coin properly certified, and the second step is to pay a
fair price at the correct time in the market cycle.
*****
MYTH NO. 2: All slabbed Mint State-65 coins are created
equal.
Nothing could be further from the truth. Coin grading is
performed on a spectrum–on a continuum. Some coins are high-
end for a given grade, some are low-end. Some coins graded 65
are magnificent–beaming with luster and shimmering in their
allure, to the point where they might be just a hair away
from meriting a grade of 66. Others are dingy, lackluster,
spotted or lightly fingerprinted, and barely qualify as 65s.
Still others are somewhere in between.
NGC recognized this early on by using the letters A, B
and C internally in the grading room. Shortly after NGC’s founding
in 1987, I worked there for three years as a part-time grader.
If we looked at a coin that we believed was a high-end 65 (or a
high-end coin of any grade, for that matter), we would use the letter
“A.” If we believed it was a low-end coin, we would use the letter “C.”
And if we believed it was in between, we’d use no letter at all or the
letter “B.”
To add to the confusion (or at least to the complexity),
there are A-plus and A-minus coins, C-plus and C-minus coins
and so forth.
The point is, you should take a close look at any coin
you’re thinking of buying, even if it’s housed in a slab. If
it looks attractive to you, it might very well be attractive
to someone else, as well. But if it looks ugly to you–if it
looks as if you had taped it to the bottom of your shoe and
tap-danced on it–then pass on the coin and tap-dance to the
next deal.
*****
MYTH NO. 3: Population and census reports tell you
exactly how many coins are available.
For a number of years, PCGS and NGC have been issuing
periodic population and census reports detailing how many
coins of each date, mint and type they have certified in each
of the various grades–and these can be extremely useful to
buyers and sellers. By no means, however, should these be
considered precise reflections of how many different coins
are actually available.
The problem is, these reports contain no consistent corrective
mechanism to account for resubmissions–cases where the same
coin is submitted over and over in hopes that it will receive
a higher grade the second, third, fourth or 50th time around.
A given coin might have been graded dozens of times because
the submitter thought it might be given the next-higher grade
and thus command a much higher price. In such a situation,
the population and census reports can be extremely
misleading.
Take the case of a coin worth $1,000 in Mint State-64
and $10,000 in Mint State-65. If it’s a very high-end MS-64
piece, its owner might crack it out of its holder multiple
times and keep resubmitting it, trying to get it upgraded to
65 and thus increase its market value $9,000. The population
and census reports do not correct for this irregularity.
*****
MYTH NO. 4: Slabbing has established a completely fixed,
totally consistent grading standard.
The grading services may indeed have striven for
completely fixed, totally consistent grading standards. But
the realities of the marketplace–and of the slabbing
business–have at the very least created the perception that
the standards have not remained fixed.
The Rosen Numismatic Advisory, an award-winning
newsletter published by market analyst Maurice Rosen,
conducts a “crystal ball” survey each year in which leading
professionals in the coin industry express their views on the
market. In the 1994 survey, virtually every participant
stated that since the mid- to late 1980s, grading standards
have loosened at both PCGS and NGC–despite representations
by the companies and their backers that the standards have
been fixed.
These experts could be wrong, of course–but even if
they were, complete precision and total consistency are
impossible in the real world. Almost any dealer who handles
certified coins will tell you that although the services’
standards are reasonably consistent today, they are certainly
not totally consistent–and it’s possible to take a high-end
65 one day, crack it out of its holder, and next day get a
grade of 66.
In the face of falling revenues caused by declining
interest in rare coins, the grading services might very well
be tempted to increase their business by loosening their
grading standards slightly.
*****
MYTH NO. 5: Slabbed coins protect you against volatility
and make better investments than unslabbed coins.
This statement is so fallacious that PCGS
warns consumers that this is NOT the case. In its
literature, it places the following
statement: “Certification by PCGS does not guarantee
protection against the normal risks associated with
potentially volatile markets. The degree of liquidity of
PCGS-certified coins will vary according to general market
conditions and according to the particular coin involved. For
some coins, there may be no active market at all at certain
points in time.”
If anything, the advent of certification actually has
created more volatility in the marketplace. And limiting your
purchases to certified coins isn’t going to protect you from
this volatility. Let’s say a Mint State-65 Saint-Gaudens
double eagle is worth $1,050 sight-unseen in a slab and
suddenly the sight-unseen price increases to $1,500 and then,
at the snap of a finger, plunges in a day down to $900. The
fact that the coin is certified will enable you to sell it at
its high when it’s $1,500 … or sell it quickly at its low
for $900–but won’t protect you against the market conditions
themselves. Anyone who thinks or says otherwise doesn’t
understand the nature of the marketplace or is
misrepresenting the way the marketplace works.
Buying slabbed coins helps to protect you against two
primary risks: the acquisition risk and the sale risk. The
acquisition risk is the risk that you might overpay when you
buy a coin. With a slabbed coin, the grade is established and
all you have to do is look in a price guide to be sure you’re
not overpaying. The sale risk is the risk that you might be
offered less than a coin is worth when you go to sell it–
that someone might offer you a Mint State-63 price for a Mint
State-65 coin. Again, with a slabbed coin, you know the grade
and thus can determine the value quite readily.
Certification doesn’t necessarily make coins a better
investment, but it does eliminate some of the acquisition
risk when you buy a coin and helps you maximize your return
when you sell that coin.
*****
MYTH NO. 6: A coin can’t deteriorate once it is
encapsulated in a slab.
On the contrary, the deterioration of coins–even when
housed in slabs–is a source of growing concern and
represents a problem that’s likely to occupy us increasingly
over the next several years.
NGC conducted some very intriguing age-acceleration
simulations in which coins that were sonically sealed in
tamper-resistant holders had their age accelerated by
decades. The results proved unsatisfactory, at least in terms
of copper coins: The coins actually deteriorated while they
were in the holders. I have seen a number of copper coins in
PCGS holders which actually broke out in spots while in the
holders.
There’s really no way that a coin can be completely
protected against environmental variables, whether it’s in a
slab or otherwise. We have seen a number of cases where
moisture in the air permeated the holders, as well as other
cases where coins made of highly susceptible and vulnerable
metals such as copper were, in a sense, choking in their
holders–trapped inside with airborne particulate matter
which was causing the coins to deteriorate.
Because copper coins are so susceptible to damage and
deterioration, NGC does not guarantee the grades it assigns
to them, as it does with coins produced in other metals. PCGS
does guarantee the grades of copper coins–but I have seen no
difference in the way these coins deteriorate while
encapsulated, whether the holders came from one service or
the other.
This is a real problem, one I sense we’ll have to
address more urgently over the next several years as coins
that are susceptible grow older in holders and their
deterioration becomes more apparent.
*****
MYTH NO. 7: Slabbed coins can always be liquidated at
Coin Dealer Newsletter prices.
Dream on! The Coin Dealer Newsletter (familiarly known
as the Greysheet) does not determine the marketplace; the
marketplace is supposed to determine the values that are
listed in The Coin Dealer Newsletter–and often, there’s a
great discrepancy.
To cite just one example, the monthly Coin Dealer
Newsletter listings for Mint State-65 Barber half dollars
early this year were, in my opinion, just about double what
they should have been. There were coins listed for $6,000
which my own company, Scott Travers Rare Coin Galleries of
New York, was offering to clients for half that much–$3,000
to $3,500. Many CDN prices are notoriously high. Conversely,
if you have one of these Barber half dollars and you see it
listed for $6,000 in the CDN Monthly Summary, don’t think you
can sell it for $6,000. You might be lucky to get $3,000 for
it. There are many similar examples, but this should suffice.
The Certified Coin Dealer Newsletter (or Bluesheet) is
more accurate, especially for generic, fungible coins–coins
which are available in great quantity and tend to duplicate
each other. The Bluesheet is certainly a better reflection of
market conditions than the Greysheet.
But once you start talking about truly rare coins
costing many thousands of dollars, the publishers of the
Bluesheet and Greysheet have greater difficulty determining
the levels at which these coins actually trade, and have
difficulty confirming transactions. As a consequence, the
price levels listed in these guides become less reliable for
such coins.
Just because a coin has a value of $20,000 or $30,000 in
the Bluesheet or Greysheet, there’s no assurance at all that
you can get that much for it if you sell it. The transaction
reflected in the listing may have occurred many months ago
and the market may have dropped 10 or 15 percent in the
interim.
*****
MYTH NO. 8: Slabbing has attracted billions of dollars
from Wall Street, and the money is here to stay.
The money that entered the coin market from Wall Street
sources, through limited partnerships, amounted to millions
of dollars, not billions. And to those Wall Street sources–
companies such as Merrill Lynch and Kidder Peabody–this was
really an experiment. On Wall Street, where stocks trade at
the rate of $40 million per minute, rare-coin funds totaling
$10 million apiece, or $20 million–or even $50 million–
don’t represent a major outlay.
The experiment proved to be unsuccessful; as a result,
the money left the coin market as quickly as it had arrived.
Given that experience, it’s highly unlikely that new Wall
Street money will be flowing into the coin market anytime
soon–and anyone who says it will return soon is either
misinformed or an outright liar.
*****
MYTH NO. 9: Inexpensive slabbed coins are always worth
at least as much as the fee you pay to get them certified.
This is a myth with special appeal to the unwary. Many
non-knowledgeable investors buying inexpensive coins feel
comfortable paying $40 or $50 apiece for these coins because
that represents such a modest markup over the certification
fee. They assume that since the slabbing fee was $25 and
they’re paying just $15 or $25 more than that, they must be
getting a good deal.
The fact is, coins can and do change hands for less than
the amount of the certification fee. When all is said and
done, you’re buying the coin, not the plastic, and you should
never pay more than the coin itself is worth. Many
inexpensive coins–common-date silver dollars and modern U.S.
coins, for example–are readily available for significantly
less than what it cost to get them certified.
*****
MYTH NO. 10: It’s easy to crack slabbed coins out of
their holders.
In reality, it takes a great deal of time and effort to
remove a coin from a slab–and it takes even more time and
effort, combined with practical experience, to avoid damaging
the coin in the process. These holders are sonically sealed,
and they’re meant to be permanent. Ease of removal wasn’t a
key concern in their design.
Dealers often do crack coins out of slabs in order to
resubmit them in quest of a higher grade–and even they have
trouble on occasion. If you go to a coin show, you’ll
sometimes see dealers trying in vain to remove such coins.
Occasionally, when an inexperienced person does the cracking,
you’ll even see coins fall to the floor as they’re being
removed.
This sort of thing can be traumatic, and I strongly
recommend that if you want some coins cracked out of slabs
and you’re not an expert yourself, you entrust the job to a
professional.
*****
There you have them: 10 basic myths about slabbing.
Do these misconceptions tarnish the achievements of the
Slabbing Revolution or diminish the contributions it has
made?
Not at all.
Third-party certification has been highly beneficial for
numismatics. But, like anything else, it needs to be put in
perspective. It needs to be viewed in a clear, bright light,
not through rose-colored glasses.
The truth–not the myth–is that even under a
searchlight, slabbing still looks very good indeed.

Comments on this entry are closed.

Previous post: EVALUATING YOUR COLLECTION 10 WAYS TO LOOK AT COINS

Next post: HOW COINS ARE RUINED