... 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."
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