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The New PCGS Secure+ and what (it might) mean for the coin business…

By John Feigenbaum – David Lawrence Rare Coins

Well, now that PCGS has made it “Big One” announcement, it’s possible to speculate on how this might affect the coin industry (I used to call it a hobby but I think that ship sailed a long time ago). There’s an awful lot to digest here, but I had the benefits of advance notice of this announcement by Mr. Hall himself and I was able to personally attend the Press Conference at the Ft. Worth ANA National Money Show when the Big One was unveiled publicly.

For starters, if you are not familiar with the “Big One” I recommend that you read/view all about it on the PCGS web site first. This was actually a dual announcement:

1) PCGS is going to start laser-scanning/fingerprinting certain submissions (the submission tier is called “Secure-Plus”, which costs a little more) to make certain these items haven’t already been submitted. If so, the system will allow the graders to compare the coins with images of the same coin to be certain it hadn’t been doctored or altered in any negative manner.

2) Coins submitted in the “Secure Plus” tier are eligible to be examined for a “Plus” grade which is awarded to any coins the graders determine to be in the top 30% of quality in the grade range. Or, as David Hall defines it, the “A” category.

Let’s start with the laser scanning technology. Mr. Hall claims that it was “never PCGS’ intention to grade the same coin 40 times” which is a way upgraders use the system to repeatedly send the same coin in until it finally gets the added benefit of doubt and achieves a higher grade that it typically would get. This ultimately is a cause for “gradeflation” which has long term negative effects on the hobby. The logic also follows that a database of stolen coins that have previously been “fingerprinted” can be marked for future submissions. In the event they ever come back in to PCGS, the coins will be flagged and justice can be served. Apparently one major insurance company is offering a discount for SecurePlus coins thanks to this service.

I love this concept for all the reasons PCGS is brandishing. But it’s flawed… Clearly, from the outset, there is a major loophole (or, chasm) in the service because only coins submitted in the more expensive “Secure Plus” tier are being fingerprinted. So a doctored, or stolen coin, can simply be submitted without the added expense and we’ll never know if it was doctored. Or, what happens if a coin is upgraded via the non-Plus service but later submitted for “crossover” into the “Secure Plus” and PCGS realizes what has happened? Will the buy it off the market? That could be very expensive for them. I directed these inquiries directly to PCGS’ President Don Willis, to which he replied that this is merely the initial launch of the product and they need some time to refine the details. I hope, at a minimum, that they ultimately choose to fingerprint every coin submitted (at least every coin over $500). I think that would benefit PCGS as much as the consumer.

As far as the “Plus” grading system is concerned, again I think this is a very good concept. Perhaps a great concept. I will let the marketplace vote on that with their dollars before I make further judgment. The concept is brilliant as it achieves dual purposes for both PCGS and the consumer. For starters, PCGS gives collectors a new reason to submit coins and add money to their enterprise. For the consumer, PCGS is giving them a way to “unlock profits” (as David Hall put it) from their high end coins. PCGS is now formally admitting for the first time that not all MS65’s are the same and there should be greater value to the MS65+ coin than the one that squeaked by on the 10th try… Dealers like myself have been telling this to customers for years, so it’s only natural that the grading services would ultimately follow suit.

The “Plus” grading is brilliant because it’s a win-win for PCGS and the consumer.

It’s hard to say what value Plus coins will garner in the marketplace, but it is easy to argue that they are worth more than their non-Plus counterparts. Only time will tell to what degree. PCGS has a lot of evidence that a similar concept worked well in the sports card market, so they are hopeful that collectors will want to give this a try.

What about CAC and the new Plus system?

I actually think that CAC is further legitimized by the new Plus grading (did I mention that NGC is going to Plus, as well. More on that later…). PCGS is an independent third-party grading service and CAC does a great job of grading the grading services. Nothing has changed here, and again the consumer benefits tremendously by getting CAC’s seal of approval on their coin. Where else can you spend $10-$20 for an independent, unbiased opinion on the quality of your coin. A coin with a “+” and “CAC” will clearly be a consensus high-end coin. In theory, all +’s should be CAC’s and visa-versa but I assure you this is not going to be the case. Grading is an art form at all levels, and everyone sees the same coin differently.

The biggest premium will go to those coins with the “+” designation and CAC stickers.

NGC follows suit with Plus Grading Announcement

Along with other dealers, I was happy to see NGC follow suit with a press release on the same day (March 25) as PCGS’ “Big One”. According to Hall, PCGS invited NGC to join them in the new grading standard. I see this again as a win-win for the services and collectors because maintain a consistent grading standard is very important for the hobby. PCGS and NGC will always grade with their own distinct perspectives and guidelines, but at least we can compare a PCGS MS65+ to an NGC MS65+, etc.

I would love to see PCGS share the laser fingerprint database with NGC, but apparently that is not in the cards. Beth Deisher, editor of Coin World, asked Mr. Hall this question and he replied something to the effect that “PCGS’s shareholders might not appreciate” diluting the potential profit of their proprietary technology. Personally, I think each grading service can and does get submissions based on their grading quality, consistency and customer services merits. The fingerprinting is a security measure that can only better the hobby. If the services are serious about getting rid of coin doctors, the only true way to do it is to create a common database that all grading services can use to be sure coins are not stolen, or doctored. They don’t have to share grades… Couldn’t PCGS charge a royalty for use of the database and monetize their intellectual properly? NGC would have a lot of coins to scan as well.

In summary, I think the “Big One” announcement might not be the biggest news I’ve ever heard, but I like the fact that the consumer has been well considered in this product launch. Often companies roll out new products to beef up revenues but forget that the consumer needs to benefit. I also love that NGC is following suit. This should go a long way to minimize customer confusion. Everyone resists change, so it will be interesting see how the dealer and collector communities react to this big announcement.

In the meantime, it’s business as usual at David Lawrence Rare Coins. We’re still buying, selling, trading and auctioning coins. Every day.

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