The Chip Board
Custom Search
   


The Chip Board Archive 04

Interesting article reproduced here ...

... in full. ----- jim o\-S

The Card Collecting Industry Can Learn A
Valuable Lesson About "Slabbing" From Coins.

by Robert R. Van Ryzin

The following comes from the December 1995 issue of Sports Cards
Magazine. The author, Robert R. Van Ryzin, was at the time editor
of Coins magazine and he offered his insights on the type of impact
so-called "professional" grading has made on the coin hobby. The
article is re-printed without permission

In January 1986 the landscape of coin

collecting in the United States changed

dramatically. It may not have seemed so at first,

for when it was born, the news of its arrival was

greeted with so much ranting, raving, and kicking

from mainstream collectors that those who were

involved in its birth must have fretted about its

chances for survival. But, like it or not, this

new entity was just beginning to take its first,

stumbling steps in what may indeed be a long life.

The "slab" (or third-party certified coin) had been

born.

The announcement of its arrival was made in the

January 28, 1986, issue of Numismatic News, where

it was reported that the Professional Coin Grading

Service was to begin operation in February from its

headquarters in Newport Beach, Calif. PCGS's idea

was that it would provide an impartial grading

service for coins at a flat fee of $15 per coin,

plus return postage and insurance, and house the

coins in permanent plastic holders.

The new service, it was decided, would have

three major goals: "1. Develop a truly permanent

and representative grading standard. 2. Develop a

way to grade coins with the highest possible level

of accuracy. 3. Provide real liquidity by

developing a real marketplace through a network of

dealers (and hopefully others) who are committed to

making sight-unseen offers to purchase those graded

coins at their current bid prices."

Demand for encapsulated coins became so popular

in such a short time that by December 1988, a

little more than two years after formation, PCGS

reached a milestone, grading its one millionth

coin. By January 1989 NGC (Numismatic Guaranty

Corp.) was reporting 180,000 coins graded. A

little more than a year later that number jumped to

430,000 coins.

The true impact of the slabbing of coins was

just beginning to hit home with collectors, many of

whom had already complained the the plastic slabs

took some of the fun out of the hobby by

eliminating the tactile sensation of holding a coin

in your hand. It was no longer only the so-called

investment coins being entombed in plastic, great

rarities were being encapsulated, including an 1804

silver dollar.

Auctions devoted entirely to certified coins

became a norm and complete sets, once traded in

cardboard folders, were now in individual, graded,

certified slabs.

Growing demand from dealers and others rushing

to encase their coins caused PCGS to temporarily

suspend its turnaround guarantee that year. In May

1989 the firm set a record, with 148,395 coins

received for certification. The previous record

had been 57,540 the prior July.

The coin market was red hot and the slab

companies were enjoying the ride. Rumors of large

sums of Wall Street investment funds ready to enter

the market had everything, including common coins,

now labeled "generics," moving up. Just about

everyone was talking investment potential and

percentages of increase, not complete sets or key

dates.

There was justification. Traditional

investment houses were looking closely at the coin

market and eventually did dabble in coin

investments to the tune of several million

dollars. But their interest was fickle. As long

as the market was booming, they were interested.

When it wasn't, they wanted no part of coins. John

Albanese, founder of NGC, warned in the Feb. 7,

1989 issue of Numismatic News, that the hobby was

heading for trouble.

"I worry, however, that we as an industry may

be going too far in cultivating this image --

putting so much stress on coins' investment aspects

that we're losing sight of the fact that above all

else they are collectibles. And without a

collector base, there wouldn't be any investment

potential to start with," he wrote.

But the market continued to go up, and, as long

as it was, few took notice. Total declared value

of all coins submitted to PCGS by Dec. 31, 1989,

had risen to $1.9 billion and slabbing had only

begun to break the surface of the available pool of

coins.

Most probably didn't realize, however, that the

growing promotion of coins as investments along

with claims of precision grading and liquidity had

serious drawbacks, most notably in the form of

increased government scrutiny of the unregulated

coin market.

PCGS became the subject of a Federal Trade

Commission investigation into its in-house

activities and claims of market liquidity. Though

it admitted no wrong doing and was not taken to

court, PCGS did sign a consent decree which, among

other stipulations, required the firm to place a

disclaimer on its advertisements to reflect the

nature of the coin market as being potentially

volatile and highly speculative.

FTC representatives Barry Cutler and Phoebe

Morse became well-known names within the hobby,

warning that unless it policed its own, government

regulation of the entire marketplace was imminent.

Fearing such, a Numismatic Summit was planned for

Oct. 10, 1990 at the Long Beach Expo in California,

where hobby leaders would gather and present

speeches and attempt to join forces in

self-regulation.

In the end, nothing would come of the rhetoric,

primarily because the market for rare coins was

disintegrating. Prices were dropping and

cash-poor, slab-rich dealers were driven out of

business. The goose had laid a big egg but it

wasn't golden. Faced with a depleted market,

devoid of fair weather investors, the pressing need

for self-regulation was gone.

Those who survived seemed to have learned a

lesson, or at least how to adapt to a new

marketplace. Collectors -- once shunned in the

hectic days of the market run-up -- were once again

embraced. Coins, it was said, should be collected

for the sake of collecting. A new entity emerged,

the "collector coin," a hybrid of all that was

supposedly holy -- a coin that merited collecting,

not investing, and attracted grassroots collectors,

not investors.

It's definitely too early to tell if "slabbing"

will bring in a new wave of investors to the card

hobby, but if there's anything that should be

learned from the coin hobby it's that the true

collectors are the backbone of any industry. The

investors will always come and go whenever a new

wrinkle adds value to any collectible. For the

sake of the card hobby, I hope card collectors

continue to collect what they like, not what has a

better investment potential inside a "slab."

Messages In This Thread

Another Article; Baseball Cards vs. Slabbing
Interesting article reproduced here ...

Copyright 2022 David Spragg