Image Composite: Heritage Auctions | Ron Drzewucki | CoinWeek
By Ron Drzewucki – Modern Coin Wholesale …..
On January 17, NGC Chairman Mark Salzberg published an open letter on the NGC website (it also went out in an NGC email). In the letter, which is accompanied by data, Mark alleges that there has been an unusual increase in the grades given out by PCGS to a broad variety of coins over the last five years, and that this has decreased the value of PCGS-graded coins on the market. He graphs out how several examples, such as the 1912-S Liberty Nickel PCGS MS66, have dropped in price over the last half decade or so as grade populations have seen jumps that Mark says aren’t explained by the recent discovery of hoards or some similar phenomenon.
The insinuation is that PCGS has changed its grading standards and that as a result populations for high-end coins have exploded, while prices for these one-time conditional rarities have gone down because of this.
Then, on January 19, PCGS President Don Willis responded on the PCGS Collectors Forum, essentially turning Mark’s arguments against themselves. Practically every assertion Mark made in his letter is countered with an equal and opposite assertion from Don.
Partisans for both companies can take what they will from these statements. Both of them emphasize how what they’re doing is good for the collector-slash-consumer. As a coin dealer that has spent the majority of my 33-year career either grading coins or working at the highest echelons of the industry, I can tell you that intrigue like this amongst the major services is not good for the industry.
Luckily, what’s going on isn’t so much intrigue as it is a result of, to paraphrase Don, “tough competition”. PCGS has made a concerted effort to broaden the gap between PCGS and NGC coins in the market by relentlessly working to provide dealers and collectors an incentive to get the best NGC coins in PCGS holders.
You’re probably aware of the PCGS crossover program ads. If you’ve been paying any kind of attention over the past five years, you’ve seen them. They appeared in print after the Newman sale in 2013. They’ve appeared online on PCGS.com and elsewhere. And they’ve figured into a number of promotions at the Long Beach Show and the PCGS Members Only show.
I personally know dealers who have crossed the country with their entire inventory of NGC classic coins – just to have them slabbed at Long Beach.
That doesn’t happen by accident. It’s the result of PCGS’ aggressive marketing.
This, and the sudden appearance of coins in the marketplace, is what accounts for the major share of the population increases.
From the Newman sale, which NGC did a great job grading, a number of coins were subsequently crossed over to PCGS holders, usually on par. Collectors and dealers had several motives for doing this: to cater to PCGS collectors, to try to upgrade the coins, or, in the event that coins stayed in the same grade–which many of them did–to try to get more money for them.
Sometimes this worked, sometimes this didn’t.
But one of the most “damning” examples Mark posts is the 1995-W American Silver Eagle. Somebody bought the coin for US$86,000 when PCGS had a population of eight coins. NGC, on the other hand, had many multiples of eight in its holders. These coins were in holders mostly because of two or three coin dealers; I put a few in NGC holders, myself. And in those NGC holders, the coins brought between $15,000 and $30,000 – depending on the market cycle.
So if you were a coin dealer, and you saw a PR70 in a PCGS holder sell for $86,000, and you were sitting on two or three in an NGC holder that might bring $15,000 to $30,000… what would you do?
Mark is smart and a great businessman. He sees the writing on the wall. If PCGS sucks all of the great material out of NGC holders, then the NGC brand will be diminished. He doesn’t want that and his letter reveals his frustration.
PCGS entered the market in 1986. NGC followed in 1987. Despite developing advantages in certain segments of the market, like Ancients, World Coins and Modern Coins (a not-insubstantial list), PCGS has always led the way when it came to Classic US Coins – which is where the lion’s share of the US coin market is.
I believe both companies will continue to pursue market share aggressively. That’s what great competitors do. I just don’t want collectors to think any funny stuff is going on, because it isn’t. This is just how markets work. And the rare coin market is no different.