The Early Days of Numerical Grading - Tom DeLorey

By Tom DeLorey for CoinWeek …..
 

Numismatist Ron Guth has very sincerely proposed that the coin industry and the significant Third Party Grading Services (TPG’s) change the grading standards that it and they use. His new system would go from the current scale of 1 to 70 to a new one that starts at 1 and pauses at AU-58, keeping the existing circulated grades intact; deletes the numbers from 60 to 70; ignores the numbers from 71 to 79; and uses the 21 different integers from 80 to 100 to replace the 60 to 70 range.

Under his system, a coin currently graded MS-60 would now be called MS-80, while one called MS-60+ would be called MS-81. A 61 would become an 82, and a 61+ an 83, all the way up to where a perfect 70 becomes a perfect 100. The grade of 100+ would not be recognized, just as 70+ is currently not recognized.

Adding grades can become a slippery slope that inevitably leads to even more grades being added. I know, because I started the avalanche.

* * *

Numerical grading began with Dr. William H. Sheldon in his book Early American Cents (1949). In the post-World War Two collecting world, desirable Large Cents were amazingly cheap by today’s standards. Sheldon studied auction records of the day and charted that on average common variety 1794 cents sold for about $4 to $6 in Good condition, $7 to 10 in Very Good condition, and $12 to 15 in Fine condition.

Very Fine coins, which were relatively abundant and made up a significant percentage of the large cent universe as a whole (which Sheldon was creating the scale for and not just 1794 cents), averaged $20 to $30, while the noticeably scarcer Extremely Fine coins fell into a narrower range of $40 to $45. The still scarcer Almost Uncirculated coins likewise fell into a $5 range of $50 to $55.

1794 cent in Mint State
1794 cent in Mint State

The legitimately rare Uncirculated, or Mint State, 1794 coins could theoretically be had (if you could find them) for $60 or $65 or $70. By his verbal descriptions of these grades, you can see that a coin had to be virtually perfect to merit the MS-70 grade, a circumstance virtually unobtainable in the universe of 18th-century U.S. coinage.

(I rather doubt that Sheldon put very much thought into the Mint State grades, as they were only a tiny portion of his particular universe. His book concerned itself with the cents of 1793-1814, which naturally tended to come in circulated grades. Mint State Large Cents were more likely to be found in the later years, such as the Matron Head coins of the 1816-1820 Randall Hoard, and some Braided Hair coins.)

Adding in the lower grades he came up with a grading scale that started at Basal State-1 (the lowest grade at which the die variety could still be determined) and drifted up through Fair-2 and Almost Good-3 to Good-4. Really nice Good coins could legitimately be called Good-6, while lower-end Very Good coins could be called Very Good-7 (VG-7). Average and superior Very Good coins were called VG-8 and 10. Again, these multiple grade levels reflected the reality of the universe of Large Cents.

1794 Cent F-15
A 1794 Cent in F-15

Fine coins were called F-12 and F-15, Very Fine coins VF-20 and VF-30, Extremely Fine coins EF-40 and EF-45, About Uncirculated coins AU-50 and AU-55, and Mint State coins MS-60, MS-65 and MS-70. Over this grid Sheldon laid a system for determining values of coins by assigning a Basal State value for each die variety, which you then multiplied times the grade number to determine the collector value. A common coin with a Basal State value of 50 cents would be worth $20 in EF-40 ($0.50 x 40), while a scarcer coin with a Basal State value of $3 would be worth $120 in EF-40 ($3 x 40).

Of course, this system collapsed immediately upon the publication of the book, if only because the simple fact of the book’s existence changed the known populations of the varieties (by making it easier to identify them) as well as creating more demand for the varieties. Nevertheless, the grading system survived, though in general it was more often used to grade circulated coins.

Coins with no circulation wear on them were called “Uncirculated” (literally, un-circulated). After that the adjectives kicked in, and therein lay the problem.

Lincoln Cent 1955-SThe most common term used was “Brilliant Uncirculated,” or “BU”. This implied a nice fresh coin taken out of an original roll or bag of coins, with all or most of its original luster and color intact. Most dealers kept “BU rolls” of current coins as a courtesy to collectors who lived in an area where coins of only one mint were available through banks. I remember buying a “BU” 1955-S cent for one dollar around 1965 to complete my Lincoln cent album number two. I did not care what the numerical grade was.

Nicer coins might be called “Choice BU” or “Gem BU” when listed in auction catalogs or advertised in one of the various weekly or monthly publications. The terms became slightly more important when well over 100,000,000 original Uncirculated Morgan and Peace silver dollars left the Treasury’s vaults between 1962 and 1964, but as most of these coins remained quite cheap for some time it still did not matter much which adjectives were used.

(My first ANA convention was in 1971 in Washington, D.C. I was trying to cherrypick 1880 Morgan dollar overdates to help pay for my college tuition, and one nice dealer let me go through three original rolls of 1880-P dollars that probably all came out of the same bag. I found 17 pieces of one of the minor overdates that I later sold for $10 apiece. All I had to do was buy one full roll that I mixed-and-matched out of the three original rolls, which I did… for $3 per coin! Today many of them would be candidates for MS-65 slabbing if not higher.)

GSA Carson City Uncirculated Silver Dollar - Morgan Dollar

The General Services Administration’s sales of mostly Carson City silver dollars (the majority of these conducted in 1972 to 1974) did make collectors slightly more aware of the condition, if only because of the GSA’s laughable attempt at sorting the coins by quality. Gorgeous coins with any mint bag toning on them were demoted to the “Mixed Unc.” category and lumped together, giving some lucky buyers real bargains, while heavily scuffed but still brilliant pieces were sold at the premium prices by date.

Then in late 1974, an eccentric Nevadan named LaVere Redfield died, leaving a hoard of some 400 original bags (400,000+ coins) of Morgan and Peace dollars, including many of scarcer dates. After some legal maneuverings, the hoard was broken up in January of 1976, and marketed over the next year or so by multiple firms.

Many of the coins were sold by the Paramount Rare Coin Company of Englewood, Ohio, which placed the nicer coins in hard plastic cases with MS-65 printed on a red insert, and lesser coins in the same shells with MS-60 printed on a black insert. Even lesser coins were sold with no grade printed on the insert, simply as souvenirs of the Redfield Collection.

These Redfield Dollars revolutionized the American coin market by bringing the Sheldon grading scale out into the open where it, and the coins, were heavily advertised. Other dealers started using the 1 to 70 scale for other U.S. series. Numerical grading was suddenly the rage.

(Some dealers did not bother to learn the Sheldon system, or else they could not be bothered to do so, and they just started throwing out numbers at random. In 1976 I was Coin World’s numismatic advisor to the advertising department, and I remember seeing one dealer’s ad copy that had damn near every coin graded “Mint State-90!!!!” because his coins were [allegedly] so much better than everybody else’s! We returned the ad unpublished, and watched him very closely after that.)

* * *

Into this turbulent sea waded the American Numismatic Association. In 1973 its President, Virginia Culver, had asked Abe Kosoff, a grand old man of numismatics, to lead a project to help define grading standards for the benefit of its members. This request was renewed at the annual convention in 1975 by the Association’s new President, Virgil Hancock.

By the time the book was published in 1977, the Sheldon numerical system was chosen to help define the grades. This was not always a given, however. In the July 19, 1975 issue of Numismatic News, Kurt Krueger, a Wisconsin coin dealer and future ANA Governor and then President, proposed a different grading system with numbers from 0 to 100.

This system was explained further in a comprehensive article covering all of the then-existing grading systems entitled “GRADING: Bestial Pandemonium Unleashed” that appeared in the January 1976 issue of The Numismatist. Besides recapping the other grading systems, it included his proposed system which is detailed in the following illustration.

Krueger 100-Point Grading Scale Proposal
Krueger 100-Point Grading Scale Proposal

From my perspective as a later professional grader, I have to say that this particular system would not have worked as written, but it had some potential and with some serious tweaking might have worked. For one thing, it needed fewer low-end grades and more Uncirculated grades, a need which I will discuss later. It also included the abomination of “Almost Uncirculated to Uncirculated,” the numismatic equivalent of the phrase “Almost Pregnant”. Either you is or you ain’t!

I do not know if Kosoff ever seriously considered using a 0 to 100 or 1 to 100 scale or not, but I highly doubt it. According to his final report on the process (delivered at the 1976 Convention in New York), he had set an arbitrary deadline for input of November 15, 1975, though as he also complained in the report many contributors were woefully late or never submitted anything at all.

Working with the many illustrious names in the hobby who did provide input, it was decided that each major coin type would be represented by line drawings with verbal descriptions. In the Mint State grades, this consisted of one idealized drawing of the design with some frankly rather generic verbal descriptions of the MS-70, 65 and 60 levels.

As coins became circulated the loss of detail due to wear would be simulated by erasing those parts of the detail typically seen missing in that grade, with the text explaining where any wear might first be seen in the highest circulated grades, and what design-specific details might be missing as the coin circulated further. Useful comments concerning striking characteristics and other factors appeared at the end of many coin types.

Again from my perspective as a future grader using this book, it was wonderful for most circulated grades, but so was the earlier A Guide to the Grading of United States Coins by Martin R. Brown and John W. Dunn, which also used line drawings. James F. Ruddy’s Photograde, A Photographic Grading Guide for United States Coins was also useful, but I always thought that some of the photographs were not quite right for the grade.

In the Mint State grades, IMHO, the ANA grading guide was a disaster waiting to happen. After the book appeared in 1977 and sold very well, the ANA dithered on setting up a “Grading Board” to enforce it. Not until 1978 did the Board of Governors approve a budget line item to actually hire somebody to grade coins, as an additional service offered by the ANA Certification Service (ANACS).

At the 1978 Convention in Houston, the talk of the show was “Who is the grader going to be?” Unbeknownst to everybody there, Executive Director Ed Rochette had already asked the two existing ANACS Authenticators, John Hunter, and Ed Fleischmann, who they thought they should hire. I had previously worked under Fleischmann at Coin World’s Collectors Clearinghouse, and he recommended me a few weeks before the convention started.

Hunter concurred, Rochette agreed, I accepted in principle, and at the convention, I negotiated to take the job through Hunter and Fleischmann without ever once speaking to Rochette. As he told me later, he wanted to be able to truthfully tell anybody who asked him “Who is the new grader going to be?” (and there were many who asked) “I haven’t talked to anybody yet.” I went back to Coin World and burned off all my vacation time, gave my two-weeks notice in October, and started on the ANA payroll on November 1.

ANACS Photocertificate
ANACS Photo Certificate

After getting established in ANACS, and after discussing the matter with Kosoff and Rochette, it was agreed that we three graders (myself as Final Grader plus Hunter and Fleischmann) would start out by asking many prominent coin dealers to send us test packages of 10 different coins in ungraded but numbered flips, with the dealers’ correspondingly numbered grades sealed in an envelope.

As each package was received we would grade the coins on a worksheet as best we could according to the published standards, and, when we disagreed with each other, discuss the coin until we reached a consensus. This is basically what we did after we opened the grading service for business, though in normal times a two-out-of-three majority was often sufficient to final grade a coin. Occasionally on rare types, we would send a coin out to one or more consultants who specialized in that series.

After conducting several such tests, I found the results highly disturbing.

For one thing, there was the problem of early coins (arbitrarily those coin types struck before the great redesign period of 1836-1839) with “Cabinet Friction” on the high points, which the dealers almost universally called “Mint State”. The classic rationalization for this practice is the theory that early collectors put brand new coins in wooden collector cabinets, sometimes with the drawers lined with felt, and that as the drawers were opened and closed the coins slid back and forth across the wood or felt and accumulated some “rub” on the high points only.

While this may have been the case on a few early coins actually held by collectors, the more likely explanation for the vast majority of them is that in the days before counting machines, coins were dumped out upon a counting table, dragged across the table towards the person doing the counting, and organized into stacks of 10 or 20 or whatever and the stacks arranged into neat little rows. Think of a roulette dealer raking in the chips after each roll and restacking them by color.

Coins counted this way get WEAR on the high points, even if they do not accumulate the nicks and scratches in the fields that normal coins receive banging against each other in normal circulation. Dealers would look at the pristine fields and pronounce the coins “un-circulated”, ignoring the wear that proved they were no longer “Mint State”.

ANACS MS70
ANACS MS70 American Silver Eagle. Today, ANACS is not affiliated with the ANA.

The main problem, however, was that I discovered that we needed more than three levels of Mint State grades, especially since the upper level of “70” was by definition “perfect” and virtually non-existent (nobody foresaw at the time that millions of modern-issue Proof and Uncirculated coins would someday be submitted by telemarketers and insecure collectors). That left me only two Mint State grades to work with, and I could see that we needed more.

I consulted with Rochette and others about expanding the grading scale upwards to 100, using the levels of 60, 70, 80, 90 and 100 while leaving room for expansion between them. Eventually, I was told that this was impossible, as many thousands of the grading books had already been sold, and the ANA did not want to anger the buyers by making them obsolete before the grading service ever opened.

More importantly, to the ANA management at least, the ANA still had several thousands of the books in inventory, and it did not want to get stuck with them by announcing an upcoming revision to the standards. For better or for worse, I had to stay within Sheldon’s 1-70 grade range.

I decided to add one grade between 60 and 65 and another grade between 65 and 70. For the first one, I chose 63, because I wanted a number that would be closer to 65 than 60, thereby implying a coin that was significantly better than 60 without being good enough for a 65 grade. For the upper number, my choices were 67 or 68, and I chose 67 partly because I thought it had a chance of occasionally being reached (remember, we were not anticipating grading any common modern coins at the time), and partly because 63 and 67 were symmetrical around the highly desired MS-65.

We opened for business on March 1, 1979, using Sheldon’s numbers plus AU-58, which I created for those “un-circulated coins with rub” that I refused to call Mint State, plus MS-63 and MS-67. We also adopted the practice of grading each side separately, so that a Morgan dollar with a few too many bag marks on the cheek but a nice reverse might get an MS-63/65. I guess we were trying to throw a small bone to the people whose coins did not make a full MS-65 by saying “well, half of your coin made it!”

Author’s Note: While researching this article I looked through advertisements in The Numismatist for all of 1976 and saw that some dealers were already using Sheldon’s numbers, though definitely less than a majority. The usage grew throughout the year, and even Kosoff started using them. I was also a bit surprised to see that dealer Bob Perrine of Syracuse, NY, d/b/a The Treasure Chest, Inc., was consistently using MS-62 and MS-68, anticipating my solution but with different numbers.

ANACS grading was a smash success, and when the Board of Governors finally noticed that we were using grades not in the book about a year later, I was in a strong enough position to be able to tell John J. Pittman, who screamed at me that we could not use grades that the Board had not authorized, “Well, John, you had better authorize them, because we are using them!”

Nowadays, of course, every number from 60 to 70 is in use, with plus signs available to all but the lowest numbers. If a new scale were to be adopted the numbers between those numbers would eventually be used, and of course plus signs. For better or for worse let us stick with what we have and work to improve the consistent use of it.
 

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