On October 17, CoinWeek conducted a lengthy telephone interview with Certified Acceptance Corporation (CAC) President John Albanese to discuss a range of issues related to his announcement that CAC would launch a new grading service in early 2023.
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Charles Morgan: I want to start, John, by asking you some basic questions about your background, which people may not be aware of necessarily. So please, just bear with me.
How did you get started grading coins in the first place?
John Albanese: Grading coins. Well, I guess that would probably be in terms of a vocation, as opposed to being a coin dealer.
I felt I caught on very early on.
In fact, I spoke to a friend of mine who’s a musician. He says, “John, it reminds me of some of these kids who play the violin.” You get some kids, their parents will spend for lessons for thousands of hours and they only get to a certain point. And other kids, within dozens of hours, pick it up. I think there’s a certain knack to it. I think that’s number one. You have to have a special knack.
But I also think you have to really love coins. Again, when I was a young child, I told the story before, I had extreme ADHD. It drove my parents crazy, drove my teachers crazy.
I remember my grandfather giving me a ’99-O quarter or something, literally in AG. I was totally fascinated with coins at a very young age. We’re talking about a five-year-old kid, I remember. I do remember it was the age of five, because it was 1964 and that was the year it was broadcast that they were to stop making silver coins. So, the next few years became like a treasure hunt for myself, and kids in my neighborhood. We traded coins together and that kind of thing.
When I was about 13, a local coin shop opened. I rode my bike there and, lo and behold, the first one I ran into was Bill Wetzler, who is, as you know, a world-class grader who works for CAC now. He was probably 16 and my so-called boss, Randy Block, was probably 21. Randy was at the time, considering the times, very sharp at coins.
Apparently, I was studying, but I had no idea. I thought I was playing.
I eventually got a job at the coin shop and I was just fascinated. Again, you might call it studying or I might call it studying, if you saw someone spending 10 or 12 hours a day doing something. But when you’re a kid, kids all like playing. I could literally sit there with coin books, and albums, and coins, and spend all day looking at coins, and reading about coins. Apparently, I was studying, but I had no idea. I thought I was playing.
Again, it’s something that I picked up naturally. And working in a coin shop, sorting coins, and looking at all the coins really helps develop your eye. I have to tell you, I’m sure there are many collectors and dealers out there, especially many collectors that probably have a superb eye for coins but they just don’t see enough coins. So, you really have to see a lot of coins. After probably being maybe into my late teens, I had probably seen millions and millions of coins. I guess they call it pattern recognition. After a while, you start recognizing patterns. You know in your mind, certain three cent nickels have clash dies and certain coins come Prooflike, etc.
Again, as I was probably in my mid-teens, Ed Hipps, Jr., and Sr., they were at the time (still are, Ed Hipps, Jr.) extremely, really great graders, and they helped refine my eye. They took a liking to me, and I was able to go to major shows with them. My stepfather was a pilot for Eastern and Continental Airlines. So, at the time, I was able to fly anywhere around the country for $9 or $10, and that was a big advantage as well. So, I was already going to national shows as a teenager, which helped.
Listen, it’s all about exposure.
It was great. Ed Hipps would give me a want list for the ANA. I’d run around the show looking for Peace dollars or looking for type coins and bringing them back, and it’ll be a yes or no. If it was a no, you will learn something. And even as a young coin dealer, a vest pocket dealer, buying and selling coins, when you buy a Barber quarter for $90 and you’re losing $15–and that was a lot of money to lose at the time–you remember it greatly.
Even counterfeit coins.
I remember as a teenager buying from a Lyndhurst coin show. I bought a Type-1 $1 gold piece and a two-and-a-half Liberty. They were blazing Gems and I bought them very cheaply. I brought them back, showed my boss of the coin store. I was proud.
He said, “John, they’re counterfeit.”
“What?”
“They’re counterfeit.”
Fortunately, this gentleman was the chairman of the show and I called him. He said, “Bring them back in a month.” But for that month, I was a little concerned. I bet that I looked at those coins for 100 hours that month. Now, I feel I could spot a counterfeit like two feet away because it was embedded and emblazoned into my brain of what a Type-1 looks like in counterfeit.
Unfortunately, a lot of coin dealers–I’m sure you know, Charles–sometimes we have a hard time explaining it and then someone will try to sell you a two-and-a-half Indian that’s counterfeit and you go, “It’s counterfeit?” They go, “Whoa, why?” My answer would be like, “It just is. I just know it’s counterfeit. I can’t really explain it.” So, there’s a problem with how we verbalize it.
Again, it’s a natural thing. It’s pattern recognition, and I think it’s also seeing millions of coins. The point is, you can’t see a million coins and spend thousands of hours doing it unless you really enjoy it.
So, it’d be tantamount to someone like myself doing it as a career. If I’m changing careers and I go to an auto parts store, let’s say, and there’s 12,000 auto parts there, I would be lost. I would have no idea. I would never learn it because I have no interest. It is too technical for me. But I’m sure the guy that works there, he knows every single part and he knows the most commonly sold parts. It’s an esoteric field but I think if you don’t love coins, you probably can’t learn coins. It’d probably be very difficult, because you have to spend a lot of time looking at them.
The whole idea of having a good eye and not having a good eye, I think it’s somewhat overrated.
I’ve been as blind as a bat since I was a teenager and I’d wear very, very thick glasses until I had contacts in high school.
I think it’s what your brain is, not your eye. I think everyone sees the same thing. Anyway, that’s how I think I became a good grader.
There are dealers that I know and collectors that I know that see the same thing that I see but they interpret it differently. They might not think they grade as well as me, but I tell them, “Listen, there’s no right or wrong here. This is just your standard, your philosophy.”
I’ve had discussions, arguments with Joe O’Connor, Warren Mills, guys like that, these boutique dealers that really have stricter standard and will have discussions about grading and they’re saying, “John, you’re wrong about this and you’re wrong about that.” I’m like, “Well, I don’t know if I’m wrong and I’m not saying you’re wrong either. You just have a different standard.” So, it’s a certain standard.
It’s probably unfortunate, Charles, because there seems to be… again, I’ve been a very large buyer over the years of rare coins as well. So, it’s almost like those who have the money rule.
I remember going back to 1985 when the hottest part of the market, the white-hot part of the market was the gold type sets. Marketing companies were selling them as MS63. And there are certain coins in gold type sets, certain coins that were really the toughest ones, like Type-2 $1 gold pieces, and five Indians, for example. All of a sudden, literally, what is today’s $800 to $1,000 super slider Type-2 $1 gold piece was an MS63. It was $15,000 and people are paying $12,000 or $13,000, selling them for $15,000. To me, it was a head scratcher.
I remember sitting down with a large group of– it was probably the 32 original guys that made markets– and the guys at PCGS. We talked about grading status. I remember saying, “Hey, these are 58.” And some said, “You can’t call those 58. They’re worth $15,000. They’re selling at 63.” I said, “Yeah, but that’s now. There could be a day when they’re going to be AU again.”
Fortunately, I think that the more technical rules prevail because PCGS never got into that trap in 1986 upgrading AU Type-2 ones 63. Fortunately by then, that market had collapsed. For those dealers, sales came way down and then all of sudden, grading got conservative.
“Grading standards can change with market conditions…” That’s crazy. That’s BS. That’s impossible. How can that be?
But it is a fact. I remember laughing about it as a teenager, whether it was MTB (Manfra, Tordella & Brookes) or A-Mark or the large houses, would always have a disclaimer on their invoices saying that “Grading standards can change with market conditions.”
That’s crazy. That’s BS. That’s impossible. How can that be?
I could never figure it out. But they were right.
There have been times in our coin market, I’ve seen it many times, where 2+2=5. And in this case, a slider Type-2 $1 gold piece, whether you liked it or not, it’s sold for 63 money. Therefore, it was 63 for that period of time, maybe for that year. The same with five Indians. Sliders were $2,000 and they became 63s. You could argue all you want and do no business or you can just go with the flow.
The point is, I’ve always said, unfortunately, there almost is no real standard, and it does change with market conditions.
Now, we hope to change that. I think we’re in a pretty uncomfortable area right now, because the market seems like it’s normalized. But at the new CAC, we are planning on having master grading sets and spending into the millions of dollars and these sets will never change. We will add to them, but we’ll never change out coins once the coins are in there. We will never replace it with a different quality coin. It’ll be a requirement for myself and other graders to examine the sets on a weekly basis to make sure we stay calibrated and stay sharp.
I don’t like to get off the subject, but the point is I was considered a good grader as a young kid. And then, I got a break. I knew a gentleman named Ed Lee. I used to speak to him on the phone and he wanted me to do his buying for him. So, in my early 20s, I was going to major coins shows, buying bucket loads of coins. I think I got good exposure that way. That made people realize that I know how to grade coins. Again, if it weren’t for that, I don’t know if I would have ever been ‘discovered’ at a young age. I guess at that young age, I was one of the ones that David Hall selected to be one of the founders of PCGS. It was myself and Sil as well, Silvano DiGenova, he was actually a bit younger and yet another super sharp grader.
Charles: With your involvement in the formulation of, or the early days of PCGS, at that point in time, how solidified were the grading concepts? Were grading concepts as we understand them today fully formalized in 1986 during the PCGS grading revolution?
John: Well, we thought at the time it was formalized and we had excellent grading sense. I have to tell you, I’ve mentioned this in Maurice’s [Maurice Rosen] newsletter back in 2008 when we started CAC, trying to explain why the grading services were so tough when they were incepted. And again, it’s part of that trap that we fell into and I’m just as guilty as anyone of grading the market. So, for example, when PCGS started in 1986, there were certain forces in the market that were, let’s say, leaders, and they were buying coins. Coins were basically going up in value between… certain coins like in 1985 and 1986 and 1987, things like 1880-S Morgan dollars, for example, hit $850.
Then I’m at NGC. We’re a new company. Of course, we’re deathly afraid of over grading coins, right? And 1880-S dollars come in and there are $850 and 65. Believe me, if you’re sitting in that chair, you’re thinking, “Oh, yeah, this is a 60… Oh, wait, wait, this is $850? Oh, my God. This isn’t a 65.” For us, when we were grading coins 65, common date Morgan dollars in those days, those coins had to walk and talk to be 65, because in our mind, since we were all coin dealers, they had to be worth $850. Otherwise, we wouldn’t put them at 65 or we’re not going to put a $200 coin in a 65 holder, because someone’s about to pay $850. That’s wholesale. Retail, you’re talking $1,000.
I remember at the time, Proof 68 Barber quarters. I believe Scott Travers sold one to Michael Rubin for $40,000. Again, picture yourself sitting in that chair looking at Proof Barber quarters, to call one a 68 coin that was maybe $1,000 five years before, and now you’re calling it $40,000… You are grading scared, and we were grading scared. It almost seems as though… Again, NGC and PCGS, the first few years, we didn’t have a 70-point grading scale. We had a 66-point grading scale. That topped out, because the prices were just staggering and for a coin to get those loftier grades, they literally had to be wonder coins. We were stuck in that market, where the prices were so high, we were grading to the market.
And then, of course, we had the market come down. The market crashed. Again, the market probably, looking back at it, it was just a lack of supply. Grading services had just started, capacity was very low, a lot of interest, a ton of demand, very little supply coming out of the grading services, and it pushed the price up before we finally hit a bubble-like atmosphere similar to last year in NASDAQ stocks.
If you look back at 1988 or 1989 Bluesheet, you’ll see Proof 67 Trade dollars at 100 grand. Now, they’re $20,000 or $30,000. Proof 67 two-and-a-half libs were $100,000. Things like No Motto quarters in 67… $80,000. The prices were absurd. I remember Texas commems in MS 67, John Pasciuti from Framingham at a coin show buying them for $5,000. $5,000! Now, they’re $500.
But the point is that it was an extreme bubble. The bubble popped and prices collapsed. When prices collapsed, all of a sudden, it just made more sense grading a little more relaxed. I remember, Proof 68 Barber quarters were $12,000 down from $40,000. It’s like, “Okay, we can now grade these 68.” We felt more comfortable because they were $12,000. I guess that the high prices scared us, and that’s natural and that’s normal, because you’re human. You want to make sure the consumer is getting a fair shake.
And then, I see that conversely too with silver dollars. Silver dollars had gotten to the point–one point I remember in the depths of the market, I don’t remember what year it was, but it might have been 2001–they were literally trading MS65 for $85. Now, at $85, if you’re a coin grader and again, coin graders were or are all coin dealers, and they understand the market. At $85, now we’re looking at a Morgan dollar thinking, “Oh, okay, yeah, this is okay, this is okay, this is okay.” And perhaps, maybe a little too loose at the time because, “Hey, what the heck? It’s only $85. No one’s getting taken advantage of by it.”
I’ve had similar conversations about Saint-Gaudens and how strict we are with MS65 here. But I have to tell you, the MS65 Saint-Gaudens prices have come down so low in price for non-CAC coins that I may disagree with the grade, but I don’t disagree with the value. If that’s their standard, that’s their standard. That’s okay.
Charles: It’s kind of difficult to get one of those in MS65 these days where Liberty doesn’t look like she lost a knife fight.
John: Yeah. I remember, I bought some. I bought a nice little grouping of them that were not stickered-nice. They’re relatively nice. They weren’t stickered coins and at the time, 64s were $1,950 and 65s were $2,020. I couldn’t believe my eyes when I saw the prices on the screen. At $2,020, I felt very comfortable buying. I would buy a hundred, I bought half a dozen, but I would buy a hundred at that price, because forget the grade, forget everything else, but the fact with gold at $1,650, looking at these coins, I would pay $2,020. Even if they were out of the holder, I’d pay $2,020. So, I didn’t feel as though anything was askew. Again, not my standard, because to me, MS65 means “Gem”. I think I’m probably getting off topic here, but anyway…
Charles: Well, I think you’ve made it clear that the standards as conceived in practice came against the realities of the economics of the market. And also, I do wonder, I’m very interested in this period of time and I’ve read multiple times David Hall’s “Inside View Newsletter”. There’s quite a bit of showmanship and salesmanship in some of his proclamations about the market and how he had solved the “grading problem” with consensus grading.
I do wonder, if you guys, at that point in time, really had a true sense of the scope and scale of what was out there, because a lot of great material was locked up in old-time collections, and you could only grade what was coming into the market at any given time. Obviously, at the time PCGS was really a dealer organization with a network of dealers, who are obviously trying to market coins that were available to them at the time. So, if you take something like the Newman collection or any of these longtime, great collections that were locked away, how could you really know or be sure of the totality of what was out there?
John: Going to shows as a teenager, I remember Richard Burdick and Bobby Emmer, and I’ll tell you something, Gene Edwards, those guys had some coins as good as anything you’d ever see. Many of them ended up in the Pogue collection. We were exposed to sensational coins. You have to remember, coins were not as popular in the 1970s and early ’80s and they were concentrated in small groups. You could go to MTB’s table or you can go to Rarcoa’s table and see 20 slugs and four or five Type-1 20s in Proof. You didn’t have to search around the whole floor. They were basically seven or eight guys who had giant concentrations of great coins. Ed Hipps has an amazing inventory of… essentially, you could have almost built a set of Walkers and three cent nickels, Mercury dimes, Buffalo nickels. He had everything, soup to nuts of great coins.
It was so much easier then because they were in high concentrations and you didn’t have to go all over the country and go to auctions. You just go to one coin show and you’d see the coins there. They were like museums. So, I think we had a great opportunity.
Charles: Okay. Well, that’s good to know. It’s a perspective that I wouldn’t know without experiencing it. So what led to the creation of NGC? Why did you go from working under David Hall, with that pioneering group of graders, to setting up a second company?
John: Well, I was just married. I had a young child. Going to coin shows, traveling back and forth from New Hampshire to coin shows, grading, it was just too much. I have other reasons that I won’t specify, no reason to, I have personal reasons, but it was just too much. I just couldn’t do it all. When I left PCGS, I had no intention of starting a grading service. But with many of the people I dealt with, it just felt like there needed to be a competitor. It just seemed like a natural thing to do.
Charles: Right. But essentially, when you went into that, did you feel any way that the standards of your enterprise were going to be different or is there any contrast between the two approaches? Because clearly, I’ve read early NGC ads, and you guys marketed the fact that you were very conservative.
John: Oh, yeah. Well, I think we were more conservative on certain things. We were bookish on certain things. But like I said, the services were so tight then that– I would tell you, the coins that I thought were– let’s say if PCGS were to grade a coin in 1986 and I thought they were a little loose. Come to think of it, they weren’t. They actually probably got it right. It’s not that we were in this tight mode. We inherited this absurd price structure. Quite frankly, I remember it well. I was 27. I still had some brain cells but…
Charles: [laughs]
John: I just felt I was either going to be a coin dealer and basically play by their rules at PCGS or change things up. Again, I got a lot of support. I think I almost felt the same way when we started the new CAC grading service here for next year. I have a certain circle of friends and dealers and I just felt like I had plenty of support back then. And right now, I feel we have overwhelming support, and that helps. When you’re doing something new and starting something new, it helps to have support.
Charles: Let’s go more or less to the present and the way the market’s going now. I don’t know if these are always your stated goals or whatever, but from just observing it, it seems like one role CAC has played is to create an equilibrium in the market for coins that were graded by the two major grading services so that maybe when, let’s say, there’s a pop 2 coin at PCGS and a pop 9 coin at NGC in the same grade, if you and your graders felt like they were quality coins, then you’re trying to communicate to the market that they should look at the coin and not the pops when determining how much to pay.
John: I would say, look at a coin, not the holder. Again, I think the main thrust of CAC was the disparity between the really solid coin in the holder and the low-end coin in the holder of the same grade. I always use as an example a Bust half dollar, let’s say, 1835, where a really nice coin was $8,000 and a so-so coin was $4,000. Most feel it’s a difficult coin to grade, and sometimes the coins that are actually more attractive could be the $4,000 coin, whether it was dipped, or improperly cleaned, or has a slight amount of friction. In any case, it seemed that the disparity was too high.
It got to a point where it became very frustrating to try to sell a coin. I remember selling a soccer dad a Saint-Gaudens $20 at my cost just because he wanted to have some gold. And then he came back at me a few games later and was sort of giving me the eye, he wouldn’t talk to me. I’m like, “What’s wrong?” “Well, I went online. I saw these Saints. And yours were $389 and his were $329,” or something like that. It was hilarious, but he was basically comparing his coins to jewelry gold, but he didn’t know.
Again, it happened to me many times. Even when I was younger, when I had a coin shop, I would sell coins to my mom’s tennis friends and sell them at my cost, and they were bringing it to another coin shop, and they were told they got ripped off, because they didn’t understand quality. So, it just seemed to me that the higher quality coins need to be somehow noted, somehow separated from the other coins and that was really the main thrust.
Charles: I have different opinions about this part of the industry.
John: Sure.
Charles: On the one hand, I think that in some respects maybe the for-profit grading business model gears the industry towards a certain level of inconsistency, even if it’s not premeditated or intentional. And I don’t think the collector gets a sufficient amount of information on the holder to describe what’s going on with the coin.
John: I know many people in business that love their businesses, they operate a business, and they’re more concerned about their product and their reputation, and their customers, than they are about profit. They may make a living, but their goal is not to maximize profits. I’ve seen this here. I’m sure you know. Our goal has never been to maximize profit. If it were, we’re really bad at it, right?
Charles: I understand what you’re saying with what you’re doing. But I just want to say, for instance, you could be a bulk submitter, send a bunch of coins in, and get some conservative grades. Perhaps, take some of the best examples out of that deal and then submit them through the regular line and then possibly get some pluses or maybe get them graded more in tune with where the market is. I don’t think it’s such a controversial statement, because I think everybody plays that game.
John: No, it’s not controversial. There’s an explanation for everything. If you’re a grading service, and you’re pumping out 50,000 or 100,000 coins a month, and you have someone sending in a bag of 1881-S dollars for bulk submission– I have to tell you, there’s no criticism to anyone. But essentially, you’re not getting the “A” team, generally speaking, on that bag. You’re going to get probably someone younger who just doesn’t have the same experience. Maybe they’re afraid of overgrading, too, I don’t know. Or maybe they’re just not used to seeing 67s. And so, maybe they cap out at 66 in their mind as the highest grade. I don’t know. I’m thinking that if someone looks at the best 66s in that bulk group and submits them again because it’s a higher tier, you’re going to get a different finalizer and it’s up to the finalizer. If you’re a giant grading service, you have six finalizers – you will not always get the same grade. I think it’s pretty clear. So, I don’t know.
Charles: No, I agree. That’s probably what it is. On the second point about how the labels themselves many times do not articulate what’s going on with the coin, I’ll just give an example. You prize originality for any series of coins as they come in. But it seems to me that we don’t really have an articulate way to net grade coins in a TPG space where’d you say… well, let’s just take a Cincinnati half dollar or something. The coin could be essentially 66 or 67 but it looks like it’s been dipped or played with, a little bit burnt and dipped out a little bit. It’s not technically destroyed. It’s not a genuine coin.
But nobody ever puts it in that 65 net and then on the back say, slightly dipped or something like that. The market can make a decision to buy it that maybe it is a really nice-looking coin at 65, but the person buying it also knows why it’s a 65 and not a 67.
And it just seems like we’ve kept this type of information unsaid so that you can have your situation where you’ve sold someone a really great Saint-Gaudens for $389, and then they see someone market it for $329… but nobody’s telling them the $329 is not that good for this reason or that reason.
John: But again, unless they have an eye for coins, they would have no way of knowing. And just like Cincinnati, if someone is coming into the market fresh and they want to buy a Cincinnati for someone, let’s say as a gift from Cincinnati most likely, then they’re going to go with the white coin, not the toned coin if they’re not educated. I’ve got to tell you, I’ve seen some beautiful white Cincinnatis. I guess they had to have been dipped, because they’re 90 years old.
Charles: They are white. [laughs]
John: Although there’s really no evidence of it, because they– You could dip a coin and after a while with a second album or an envelope, it does get some kind of skin back on. It does get a mellow look to it, it doesn’t look stripped. I’ve seen coins that were dipped, but there’s no evidence of dipping, right?
Charles: Right. But then, you also see straight-graded coins that have been dipped that have dip residue still on the surfaces.
John: Well, that’s a whole different story. When we say dip residue, I use the term ‘burnt’, which means their coin is very, very– you see them like a Proof Morgan dollar– very, very dark. It looks like a black Morgan dollar. It gets dipped, and then it turns yellow, and it’s in the holder to be highly offensive. The coin can be technically perfect, but probably only worth 63 or 64 money.
But to me, that’s all offensive… a dark yellow Proof Morgan dollar. In fact, I’ll text you a picture when we’re finished with the phone call.
Charles: So, don’t you see that the market would benefit in some respect from that coin being put in a holder, where it says ‘Proof 63 net’ and then on the back it says ‘Dipped’?
John: I guess. I used to work in a coin shop as a kid. I had jewel luster in my home as a kid. Personally, I don’t look at it as a mortal sin to dip a coin. I think it’s okay to dip certain coins. It’s not okay to dip other coins. Clearly, on this Proof Morgan dollar, it was a backwards move. It never should have been dipped. And many times, people dip the wrong coin and many times, people look at that coin and go, “Oh, this is overdipped.” Well, no it’s not. It’s not overdipped. This coin wasn’t dipped 10 times. It was just dipped once. You never should have dipped that coin. That’s the problem. There’s this misnomer of “overdipping”. All you have to do is dip the wrong coin once and you’ve ruined it.
Again, the question is, should that coin get graded? In the new service, we don’t even know what to call it. We’re thinking, do we call it “burnt”? I spoke to Scott Travers. He says, “No, call it improperly dipped.” Bill Shamhart says, “Call it burnt.” Joe O’Connor: “We use the word burnt, right?” That’s a pretty negative connotation. But ‘Proof 60 details burnt’ or ‘most likely Proof 60 details improperly dipped’ is probably what we’ll call it.
Charles: Well, I guess what I’m saying is if you consider the fact that there are accurately graded coins that you’d never consider adding a sticker to because of originality or other issues, then that would probably benefit from just being net graded. The copper guys would net grade a coin down for some planchet issue or whatever and the coin would still be in their condition census. Whereas if it were details, then maybe it’s taken out of any conversation about the condition, because that’s so derogatory. It says this coin’s kind of ruined.
John: Right. We’re planning on using details quite a bit. There are many coins I see today that I would put a detail for. It’s very difficult for me to, let’s say, look at a 1799 $10 gold piece that’s truly uncirculated, it’s probably a 62 plus, but it looks like it’s been cleaned to the point where I find it to be minorly offensive. I don’t have the ability to grade it well. I don’t know. I wouldn’t know what to do with it. So, I just prefer to call it ‘MS60 details cleaned’ as opposed to lowering the grade to the value. Just call it what it is.
Charles: Okay.
John: I think we’re on the same page there.
Charles: Yeah. I see where you’re coming from.
John: Yeah.
Charles: In the past, you’ve taken a fairly vocal position against the industry’s adoption of plus grades. I think in our conversations you’ve even mentioned a few times that there are already too many Mint State grades. I mean, what’s really the difference between 60 and 61?
John: Sure.
Charles: With the new grading service, you’re facing the reality of the market that has been established by your two competitors. So, what caused you to change your position and adopt a system you didn’t like?
John: Yeah. When asked if the new CAC will adopt the plus grade, my answer is always the same: Yes, unfortunately. That’s my answer, because I just feel that ship has sailed. We’re not going to change it.
Let’s say we don’t recognize the plus grade. We grade 100 beautiful MS65 type coins in a fresh deal – half of them are pluses and half of them aren’t. If we don’t plus them, more than likely, your best coins are going to be taken out of your holder and they’ll end up at a plus grade somewhere else. So, what do you have? You just got cherry-picked. I don’t mind getting cherry-picked if our 65 plus goes to a 66 or a 67 at another third-party grading service. I think that’s normal.
But the fact that you’re basically sitting there exposed and all your best coins have come out of the holder really is not the best look for you. You want the nice fresh coins in your holder, and the way to do that is to maintain the plus grade. Again, I’m not a fan of it, because I just think there are already too many grades and now, we’ve just doubled it.
Charles: One of the value propositions, I think, collectors have applied to the CAC stickering system is the idea of having a second opinion reinforcing the grade that was assigned originally. So with your new service, that changes the value proposition, because now you’re the primary opinion maker. Is there a risk in making that change?
John: I’ve never really looked at CAC as having that be the primary focus. Yeah, the way we have it set up right now with our grading staff in Virginia Beach is we have three world-class graders and I’ll be there one week a month, or two days per week. We’re not really sure yet. I’ll be there for tiebreakers.
Someone asked a good question on our forum: “A tiebreaker? There’s three guys. What’s a tiebreaker?” But any one of those guys has the ability– If an MS65 Barber half was submitted in and we have two guys call it a five plus, one guy calling it 66.” If they can’t agree, then any one person has a veto power to send a coin to New Jersey or to have the coin held there for me to review, either way. The first thing I would say is, “Let’s look at the grading set.” If we don’t have that coin grading set, my next answer will be, “Let’s get one.” If they look at the grades every Monday morning, that should be enough to calibrate them.
Again, I’ve mentioned this in other discussions where I have met with our graders, and it seems to me that after looking at 500 coins a day and having disagreements on certain coins, we’re talking about a handful. Like one day, it’s four coins. One day, it’s seven coins. Very, very few disagreements at this point. We find certain tendencies where I have found that I am extremely intolerant when it comes to friction.
To me, if I see a Walking Liberty half with a little bit of friction on the skirt line and on the breast, to me, it’s AU58, I don’t care what the holder says. The coin could be a Gem otherwise. There are some that say, “Well, you have to call it a 63.” Well, no, you don’t. It’s AU. It is Almost Uncirculated and that’s that.
Maurice Rosen made an observation a few years ago. We published our POP reports on early Walkers, he said, “John, this is strange. You don’t have any MS61 or 62 early Walker’s like ’17-Ds and ’18-Ds and things like that.” I said, “Yeah, that’s because to us, they’re sliders”. They don’t sell but they sell for 62 or 63 money and that’s fine. But the point is, I believe those coins should be graded. This is where the plus is helpful. They just ran 58 plus.
I did go head-to-head with one of our graders on this issue. Again, as far as the three or four of us, we all see the same thing. It’s not like I’m training these guys. Everyone’s fully trained. We all see the same thing. We’re essentially just learning tolerances.
So, we have an experiment going on. I purchased from Bill Wetzler two 1946-P halves both brand new, beautiful fresh, like out of a roll, MS64 coins, and I put one in a mylar flip and right now, there’s one in Ron Drzewucki’s pocket. It’s been in his pocket since September 26th. So, what’s today? October 20th, 19th? What is today?
Charles: October 20th.
John: Yeah. So, it’s been in his pocket for 25 days and I ask him every day, “What does it look like?” I’ve done this before with a Washington quarter. He said, “It’s choice BU.” I said, “See, there you go.” It’s literally been in his pocket every single day for 25 days and there’s no rub on it. So, my point is, when I hear this nonsense about cabinet friction or just a little bit of rub. It’s choice BU.
I think for the Washington quarter, I had it in my pocket. I think it took 50 days, where I could see just the simplest trace of rub.
I think a lot of these Walkers I see that I think are 58 pluses, I think they’ve been in circulation for 60 days. And keep in mind as well, Charles, as you know, when you go home and you take your money out of your pocket, you throw your change in a bucket or something you don’t sit there. At least, I don’t. You probably will take the same quarter, nickel, and dime every morning and put it back in your pocket, probably goes back and forth.
Charles: Yeah.
John: This coin could slosh around for 60 days in circulation over a two- or three-year period for 60 days intermittently.
Charles: Right.
John: This will prove the point that cabinet friction, it’ll be probably the equivalent of being in someone’s pocket for 90 days. Looking after the consumer, there’s really no harm, no foul in some respects, because the MS62 Bust half with cabinet friction sells for 58 plus money anyway. No one’s getting hurt financially. It’s a matter of philosophy. And my philosophy is if it’s Almost Uncirculated, then you call it what it is: ‘almost’. But it has been in circulation and I’m certain that many, many coins that are in Uncirculated holders, and many coins that are Uncirculated, have been circulated. Now, there’s no evidence of circulation, just like the coin in Ron’s pocket for 25 days. There’s no evidence whatsoever of circulation on this coin today, so it’s still Uncirculated.
Charles: So, who’s going to be on the losing end of this bet here?
John: Well, we’re all going to be winning because it’s educational, it’d be a great article. We’ll give it to CoinWeek exclusively, if you’d like.
Charles: [laughs] Sure.
John: I think it’ll be fun. I think it’d be fun. Again, this is my pet peeve… friction. So, I think I did influence Drzywucki on friction. And I have to tell you, there are certain coins where he and Bill Shamhart and John Butler will convince me, “Oh, here’s an 1881-CC dollar at some 66. I see a bag mark, I freak out.”
They’ll go, “John, come on. It’s well struck, it’s frosty, it’s beautiful, it’s a Morgan dollar.”
And this is the whole point why I tell you that– morphing into one unit. When you’re with a bunch of guys, they all see the same thing, over a period of time. You do tend to pick up on the other’s tendencies – and they’re probably right. I’m probably a little too tough on some of the Carson City Morgan dollars. Whether I know it or not, I’ve probably altered my grading a tenth of a point on them without even admitting it, because you learn and you sharpen your skills. This is why it’s important to have that unit. This is how it was with Mark Salzberg when I hired him at NGC. I brought him on as a partner and I already worked with Mark at a coin store. So, he was already fully trained.
Mark and I would sit there and grade coins at NGC back in the 1980s and ’90s. He went on vacation or I went on vacation, it didn’t really matter. It was interchangeable. You got the same grade, no matter who was in that chair. We were better when we were together, but when we were apart, I had no problem going on vacation knowing that Mark was grading. I know he felt the same way when he was on vacation.
And this is how we want to set up in Virginia Beach, where the four of us are in line. And then after we get this established, we hire some younger guys, and we get them in the mix. We want this to go on for not just a few years but for 30 years, 40 years. I have friends that are in their 50s and 60s that are buying these coins for their grandchildren or even unborn grandchildren. I don’t want them to have this issue in 30 years.
I think it’s important to emphasize–and I believe this is a battle, as I said, that I would like to lose–but we’re going to put an awful lot of resources financially and brainpower-wise into building the best grading sets available for teaching, bringing them to major coin shows, and for calibration for graders. And again, this is a battle we’d like to lose and this is really my only challenge to the grading services like, “Come on, guys.” I’m just as guilty. I don’t have a grading set at CAC. That’s on me. I think there’s a need for comprehensive, extensive grading sets. It’s going to cost a bunch of money, but it’s well worth it.
Charles: Let’s change gears and talk about the future CAC grading service. In the past, CAC has applied green and gold stickers selectively and the CAC appellation has been accepted by the market as a signifier that a coin is strong or desirable for the assignment grade. In pivoting towards a full-service grading model, you’ll be compelled to encapsulate coins that would technically merit a grade, but not the A-B coins. Do you think that, because of this, CAC could run into the same problem that vexed the market pre-CAC, that there are great coins being sucked up by collections and only less ideal examples make up dealer inventory at coin shows?
John: I disagree with your question. We’re not going to be compelled to do anything. If a grader is receiving a coin at CAC and grading it, if it’s an A coin, it should get a plus. If it’s a solid-for-the-grade B coin, it doesn’t get a plus. If it’s below that, then it goes to the next grade down or even a details holder. [Editor’s Note: This is an apparent change to CAC’s current policy where the company asserts that some coins are certified accurately for their grade but are on the lower end of the quality range for that assigned grade. These coins do not get a CAC sticker.]
I’ve always tried to put it into terms of A, B, C to make it easier to understand for the public. But the fact of the matter is this: If I have a collector come here with 40 coins and only two of them are stickered and he’s thinking, “Well, does that mean the 38 coins are overgraded?” I’d say, “Of course, not. No, these are what we call “C” quality coins. They’re commercially acceptable. It’s their standard.”
We have different standards.
In our standard, if it’s solid for the grade, then it gets a 65. If it’s higher for the grade, then it gets a five plus. If we’re really on the fence, we always want to give the benefit to the consumer. If it’s a borderline coin, if it’s a liner, then of course we won’t be 100% consistent on liner coins, just as I told you we had disagreements with experts on five or seven coins out of 500. There are always going to be liner coins getting through here and there, but we want to give the benefit of doubt to the consumer.
I’ve always stated we have bull markets, we have bear markets, we have normal markets. In bull markets, everything flies, everything works. But when we have a bear market, it’s just natural that everyone all of a sudden gets stricter. I like to think that CAC coins would hold up in bear markets and CAC coins, predominantly, most of the coins, if they were just cracked out the holder, would still hold up at a coin show with experts buying them uncertified. That’s how I look at it.
If it’s a borderline coin, a 64 or 65 coin, and you’re at a coin show and the coin’s uncertified, then I don’t think you’re going to get a dealer to pay you 65 money for it. They’re going to want to pay 64 money for it and hope they get 65. In this case, we are going to knock it down, because we’re going to give the benefit of the doubt to the collector. It’s not going to make us the most profitable and largest grading service, but we have over one hundred partners at CAC that are all on the same page. The intent is doing it our way and doing it for the long term. So everyone’s on board with it.
Charles: If somebody has a CAC coin in an NGC or PCGS holder, is there a benefit for them to submit their coin back to your service for re-encapsulation?
John: I don’t know. Personally, I don’t see a benefit today. We are going to have a registry set. Actually, we have two registries. One registry will be exclusive for CAC (the new CAC product) as well as the NGC and PCGS coins that are stickered. Those coins will fit our registry just like a CAC coin. There’s really no benefit from that standpoint. We’ll also have another registry on the other side, which will take all coins, and that coin will fit there as well too. So, I don’t see the point if someone has a $1,000 coin that’s stickered, I don’t understand the benefit of shipping it, paying postage both ways, paying a grading fee, I don’t see a point. It’s not going to matter to our registry. I don’t see a point. I wouldn’t do it. I think I would just wait and see. It depends on the market. Three years from now, if the market demands the new holder, then they just switch it over. But I wouldn’t do anything. I always tell collectors, “Don’t waste your money on shipping it back and forth, and getting pluses, and re-holdering them. Just spend your money on the coins. Don’t spend on the service. Spend it on the coins.”
Charles: Would your new service guarantee that a coin in an NGC or PCGS plus with CAC holder would cross at that grade to your new service?
John: Well, as a plus, no, we won’t guarantee it across as a plus, because we’ve always disregarded the pluses. It wouldn’t be consistent. It wouldn’t make any sense for us to say– Quite honestly, when I see a coin with a plus on it, I disregard it. I just grade it as though it’s solid for grading. I think many of them are pluses. However, I don’t believe all of them are pluses. And contrary to that, I see a lot of coins, I think, that deserve pluses that don’t have pluses.
Charles: Would you guarantee then at least the baseline level of the numerical grade without the plus?
John: Correct.
Charles: You can commit that would be at that level they would cross.
John: Oh, yeah. Well, for sure.
Charles: Is CAC, the grading service, going to have some collector protective guarantee or buyback guarantee. What are you going to offer?
John: We’re going to have a grading guarantee, for sure. I think we’ll have a grading guarantee. Again, we will use our grading set as an example – Does that coin fit the grading set? But I don’t think a grading service can really exist without having a so-called “grading guarantee”. I don’t even know if they want to call them guarantees. It’s really a policy, because 10 years from now in our 10-year anniversary interview, we’re going to have billions of dollars of the coins out there and we’re not going to have $10 billion in the bank. So I don’t know how you can really guarantee all of that. I know a bank can do it, but I don’t know, I think from a legal point, I would call them a policy, not a guarantee, because there’s no way we’re going to have billions of dollars of assets in 10 years to guarantee every single coin.
Charles: In what ways do you think that the CAC grading service will compete against PCGS and NGC? Besides the obvious that now you’re grading coins and you’ve been for years getting top-of-the-market coins submitted through your dealer network and buying those coins. Do you think the way either service is set up that one will be a more direct competitor than the other or do you think it’s going to be a three-way competition?
John: Quite frankly, I’ve never really thought about it. We’re going to do our own thing with our own standard. I haven’t really thought about it, sorry to say. I guess I should have thought about that, maybe…
Charles: [laughs] Okay. Do you anticipate a time when CAC would provide conservation services?
John: We’re not going to do it commercially. I did speak to my operations manager, I said, “Hey, occasionally, we could have a situation where someone sends in a CAC coin, and they want to cross it over, and there’s a film of PVC on it. What do we do? We can’t cross this PVC. We got to take it off with some type of a solvent.” And so we are setting up… it’s a regulatory thing, all sorts of venting, and things like that just to simply remove PVC from a coin, but I don’t anticipate doing this on a commercial basis, no.
Charles: You don’t see burning off copper spots on gold coins or anything like that?
John: To do what? I’m sorry.
Charles: Burning off copper spots on gold or the other kinds of commercially acceptable tricks with coins.
John: That’s not going to happen. So, no.
Charles: Okay. All right. Next question: What technology do you anticipate CAC bringing out at launch? Should collectors anticipate a robust informational, educational backend with your service, like high-quality imagery or any of the things that the other services have offered for a few years now?
John: Right. We are setting up three different photography stations. We are consulting with several experts on photography right now. That’s certainly going to be part of our product. Whether we have a chip in our holder or QR code, one could be at a coin show and match up the coin in the holder to the photograph on the website. We will have a first-class registry set as well.
Charles: Will you be accepting or re-accepting colonial coins, or modern coins and bullion coins, things like that?
John: Well, we will be doing colonials. I don’t think from day one, we’re setting that up right now. But we do anticipate doing colonials, yes. Modern coins, it’s the same answer as the pluses. Unfortunately, yes, we’re going to do modern coins. I don’t think we’re going to be as large, but we’re going to do it.
I don’t have a problem with modern coins. I actually like a lot of them. But it’s the way some of them are sold that I have a problem with. We’re going to have lengthy disclosures and disclaimers on our website about modern coins.
Charles: Well, I can think of a situation where somebody at a marketing company could take and order 50 or 70 graded coins from a different service so they’re pre-sorted in a way and then send them to you. Some percentage of them would get 70s from you and then gain from the arbitrage implied by the “new” standard. Is there a way that you’re going to look at this type of material to hold the line on what perfect means as opposed to what those that market this material want?
John: Well, you can determine that because I know you have a good eye and we will have them in our grading set. When you come visit us, you’ll see for yourself. We are planning on grading modern coins the way we do vintage coins. The thought of people crossing them over, I’d never actually thought of that.
Charles: It’s going to happen. I can guarantee it. [laughs]
John: I hope it doesn’t. Maybe a few dozen coins a day, that’d be fine.
Charles: [laughs] You’ll see. [laughs] Is CAC going to do anything about world coins? Do you foresee this becoming a full-service grading company in a few years’ time? Is that the plan?
John: We’ve been asked about world coins and other products. I feel that we have an amazing world-class grading team for US coins. That’s enough to get started.
As far as world coins go, I’m not saying no, but without the experts, as you know, you don’t have anything. We’re not going to just start a world coin division and say, “Oh, by the way, we’re hiring graders.” If you can bring in a few world-class graders, then we’ll talk about it. Then we’ll have a conversation. But without the absolute best talent, there’s no need to talk about it. It can happen in a few years. We have resumes pouring in from graders that claim to be experts. I haven’t gotten that far. There’s plenty of other things to do before that.
Charles: Well, John, that’s about it for today. Please send me an email with a picture of the first CAC Silver Eagle in a holder, because that will be one for the record book. [laughs]
John: Okay. Great, for sure.
Charles: All right, John. Well, thank you for taking the time. We appreciate it.
John: Thanks.
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