PCGS recently announced that they plan to begin encapsulating coins that would have formerly been “body bagged” in the past for reasons such as damage, cleaning, and artificial toning. How does this affect the day-to-day operations of my firm and inventory and what are my personal feelings about such coins? The new PCGS “genuine” holders will have zero impact on DWN. My orientation has always been towards choice, problem-free coins and it is highly unlikely that I will be selling coins in “genuine” holders or even recommending them to my clients. If any of my submissions to PCGS wind-up in such holders (and hopefully this will not occur very often!) such coins will either be consigned to auctions, wholesaled to other dealers or, in the case where I think PCGS was wrong, resubmitted.
How do I feel about PCGS deciding to offer this service to their customers? I am assuming they made this decision because of considerable feedback from collectors (and dealers) who felt that a genuine-only holder was important, especially given the success of such a product at NGC. My feelings about the holders are mixed. I feel that they slightly dilute the PCGS brand in terms of non-problem coins but I think they offer collectors a degree of safety regarding the authenticity of rare issues.
Will the PCGS genuine holders have an impact on the market? I believe that they will. Some of this impact will be good and some, I think, will be not so good.
The positive impact that the genuine holders will make is that they will help to quantify value on problem coins. Problem coins are exceedingly hard to ascribe value to and by having slabbed problem coins trade more regularly, collectors will get a better idea of what they are worth. As an example, if three 1795 half dollars in “genuine only” holders trade at auction for $3,500, $3,850 and $3,350 a collector can get a pretty good idea of the value range of a similar coin. The bad news here is that no-grade coins are not as readily quantifiable as problem-free coins. If a coin is no-graded because of “scratches” how do you value it versus the same coin that is no-graded because of a harsh cleaning?
The negative impact that the genuine holders will have on the market is that they will encourage collectors to think like bargain shoppers. I would look at a damaged 1795 half dollar as the “Wal-Mart” version of this issue. In other words, a collector will be attracted to such a coin because it is a cheap version of a non-damaged 1795. As I will explain a bit further into this blog, I am a big advocate of original coins and I think collectors are doing themselves a disservice if they buy a $3,850 scratched 1795 bust half dollar because it seems “cheap” in comparison to the same coin without scratches.
One unintended consequence of the genuine holder is that it will spawn a new class of “crackout” dealer: the person who sees a lightly scratched or mildly cleaned coin in a genuine holder and feels that it is actually no worse than a regular quality piece in a PCGS (or NGC) holder. I already know dealers who have had some big hits cracking coins out of NCS “cleaned” or “damaged” holders and getting them into regular NGC (or PCGS) holders. I have no doubt that this will happen with the PCGS genuine holders.
As I mentioned above, I do not personally like damaged coins and I try to stay away from them unless it is an issue that is so incredibly rare that I basically have no other choice. An example of this might be an extremely rare Colonial coin variety of which there are just three known. Am I going to pass on an example because it is on a pitted planchet or it has scratches or because it’s been harshly cleaned? Of course not. But for every instance like this, I can think of a dozen reasons why I would pass on the aforementioned 1795 half dollar with scratches at $3,850.
So what are some of the reasons that I dislike damaged coins? First and foremost, they tend to be ugly. Once I see a big scratch on a coin, I see it magnified every time I view it. Secondly, coins like this are hard to sell. If you don’t believe me, assemble a collection of PCGS (or NGC) genuine slab coins and take them to a coin show. My guess is that they aren’t going to generate much interest. Thirdly, they are the antithesis of what collecting is about, at least to me. I buy specific coins because they are rare, attractive and high quality; not because they are unattractive but a good deal relative to undamaged coins.
To me, the bottom line about collecting is this: if you are pursuing a series that is beyond your budget and you have to cut corners to participate than its time for a reality check. Look, there’s nothing wrong with owning up to the fact that you’ll never be able to afford a nice 1794 dollar. But I would contend that the $75,000++ it will take to purchase a problem-riddled example of one could be much, much better spent on choice, original coins; either within the Bust Dollar series or in another series where the key issues are within your budgetary restrictions.
I touched on one thing earlier in this blog that I do think is important about the PCGS genuine slab. The no-grade market right now is sort of like the Moroccan Bazaar of numismatics. A coin like a cleaned 1916-D dime with VF detail might or might not be genuine. The PCGS genuine holder will, at the very least, separate the real examples from the plentiful fakes and this is good for the collector (or dealer) who is unable to distinguish between the two.