book cover Introduction
The Grading Process
How To Grade Mint State Coins
Surface Preservation


Determining Grade
Is It Proof Or Business Strike?
Prooflike Coins
Grading Other Series
Why Won't They Grade My Coin?
High End vs. Low End; The Bust-Out Game
Computer Grading
About the Author


"Science seeks generally only the most useful systems of classification: these it regards (as true) for the time being, until more useful classifications are invented as true."
                - S.I. Hayakawa

It is doubtful that the science of rare coin grading has ever changed so dramatically as it has in the past twenty years. Since the early 1970's, numismatics has been transformed from almost a pure hobby to a fairly sophisticated investment medium. Those of us just starting in the rare coin business (I opened my first rare coin store in 1968) could see that a change was coming. It was obvious that investors would soon be invading the hobby, However, none of us had any idea of the impact that the rare coin investment business and the new technologies adapted to deal with it, were about to have on the entire field of numismatics.

Since the early days of coin collecting, numismatists have needed a method to describe the quality of a particular coin. However, until recent times coin grading was informal at best. One coin collector would simply try to get accustomed to the meaning of the terms of description employed by each dealer he knew. After enough dealings with that dealer, he would usually know from the description whether or not that coin was suitable for his collection.

There have been many attempts to standardize grading throughout history. The American Numismatic Association actually had a grading committee from 1908 to 1911. Numerous attempts were made to set standards for a particular series, such as the Gettys-Catich articles on grading commemorative half dollars, which appeared in "The Numismatist." However, one would have to say that the first effective effort was authored by Martin R. Brown and John W Dunn in 1958. As far as I know, A Guide to the Grading of United States Coins, was the first illustrated, scientific guide to the grading of United States coins. In 1970 James F. Ruddy (See footnote #1) authored an even more useful grading guide entitled Photograde. As a result of these two important works, the grading of circulated United States coins has remained relatively standard and uncontroversial for the last two or three decades.

Since 1970, however, the grading of circulated coins has become a far less important part of the total grading picture. On the whole, investors seek the highest quality coins available. This drives up the prices of those coins. As more investors enter the market, a much larger segment of the total value of the market comes to be composed of the highest quality (i.e.. uncirculated and proof coinage.)

Many of those familiar with the Sheldon grading system (Numbers I through 70) will be surprised to learn that Dr. Sheldon's system was originally designed to apply only to copper coinage. Mint state grading (MS-60,65 and 70) applied mostly to color. A brown uncirculated coin was MS-60, a red and brown coin was MS-65, and a full red large cent was MS-70. Bagmarks, strike, lustre and eye-appeal were far less crucial to the grade.

Even more interesting was Dr. Sheldon's attempt to relate grade to value. When he devised his system in the late 1940's, it was his intention that anyone would be able to assign a value to any grade of a particular coin merely by multiplying its base or "basal" value by the numerical grade. (The Sheldon system did provide an additional premium if a coin was among the finest of its kind. However, this wouldn't make a significant difference when dealing with common varieties). Thus, a Mint State-70 coin would, in theory, have been priced at exactly three and one half times the price of a VERY FINE-20 coin, Of course this system seems Particularly bizarre in light of today's pricing structure. Now a MINT STATE-65 example of a common date large cent might bring over a hundred times the price of a VERY FINE coin.

Actually, the Sheldon system did not gain any acceptance outside of the large cent collectors' community until the early 1970's. When the system was first introduced to Morgan and Peace silver dollars, the intention was for MS-60 to refer to a mint state coin with normal to heavy bagmarks. MS-65 described an above average mint state coin with fewer than normal bagmarks, and an MS-70 was an exceptional uncirculated coin, which might fall somewhere close to today's MS-65 grade. In fact, I remember Paramount International Coin Corporation (see footnote #2), at that time one of America's largest and most respected dealers in U.S. coins, running several full page Coin World and Numismatic News advertisements using the Sheldon scale. These ads listed EVERY DATE of Morgan and Peace Dollars in MINT STATE-65, and the vast majority of dates in MINT STATE-70 grade.

To put things into better perspective. in fewer than 15 years, a MINT STATE-65 coin has gone from being an above average mint state coin (approximately I out of 2 or 3) to being a choice or gem coin (perhaps I out of 25!). The reason for this change is that there has never been a standard for grading mint state coins. If the pricing guides said that a MINT STATE-65 Barber Quarter was worth $3,000, then a Barber Quarter worth $3,000 was "today's" Mint State-65. That didn't mean the same coin would be tomorrow's MINT STATE-65, when the pricing guides say $5,000, nor did it mean that coin was last year's MINT STATE-65, when the pricing guides listed MS-65 Barber Quarters at $2,000.

The dealers set their grading standards for mint state coins based on the pricing guides. And the pricing guides didn't have to be reliable or meaningful in their own right; the grading standards themselves would change to accommodate the prices reported. It was even more difficult to tell the difference between grading changes, incompetence, and outright dishonesty. Suppose you bought a coin as MS-65 in 1978, and could only sell it for an MS-60+ price in 1984. Was it because the standards had changed, or because of a bad buy? The answer is by no means clear. It was a confusing system for dealers, and it must have been totally baffling to a novice collector or investor.

In 1984, my partner, Steve Ivy and I set up the Numismatic Certification Institute (N.C.I.) in an attempt to standardize grading. Our goal was for coins graded by N.C.I. to be considered consistently graded enough to trade sight-unseen by dealers. The concept worked very well, and became part of the inspiration for an even better concept, P.C.G.S.

In 1986, David Hall, who will probably be remembered as the greatest numismatic marketing genius of this century (probably even more than B. Max Mehl) founded P.C.G.S. The P.C.G.S. concept was to grade coins by the consensus of a panel of experts, and then seat these coins in tamper-proof plastic holders. David Hall put together a group of America's leading dealers to trade in PC.G.S. graded coins on a sight-unseen basis. Today, P.C.G.S. coins trade over a national electronic trading network. As of this writing P.C.G.S. has graded literally millions of coins with a total market value well into ten figures!

In 1987, N.G.C. entered the market using a similar grading standard. Both services are highly respected, and have made a major contribution to the efficiency of trading in the rare coin market.

But perhaps even more important is the contribution these two superb services have made to numismatic education, albeit inadvertently. Now a collector, investor or dealer can view hundreds or even thousands of coins at a single coin convention or auction, all graded by essentially the same standard. What a great way to practice and learn coin grading skills! As a direct result of P.C.G.S. and N.G.C. (and I like to think to some extent, N.C.I.) it is much easier today to become a skilled grader of uncirculated and proof coins than it has ever been in the past.

Grading circulated coins has never been especially difficult. Practically anyone can learn how to do it with practice and study. Grading circulated coins is a "piece of cake" compared to grading mint state coins. The following humorous story makes a good analogy.

Imagine a Martian spaceship hovering above a golf course. Two Martians observe an Earthling slice his first shot into the rough. His second shot lands in a sandtrap. His third shot rolls well past the green. And so on. Finally, his eleventh shot is a heroic chip onto the green, which miraculously rolls into the hole. The first Martian turns to the other and says, "Looks like he's really in trouble now."

Most coin investors are just like the Martian. Not only do they have no idea how to grade mint state and proof coins ... they don't even know the basic rules of the game. So first things first. In this guide, I am going to try to teach you the basic rules of grading. Then I'm going to describe some of the finer points. But first, I'm going to suggest to you a few ideas on ways to gain sufficient practice in order to make a respectable showing at the game of coin grading itself.

"Never learn to do anything; if you don't learn, you'll always find someone else to do it for you." - Mark Twain

The preceding advice was sarcastic. Mark Twain was poking fun at human laziness, which often causes us to depend on other people's judgement. Nobody can be depended on to look after our own interests as well as we would ourselves. Yet we've all been guilty of that sort of laziness at some time in our lives.

The next obvious question is: What if I don't have time to learn coin grading? The answer is that if you don't learn how to grade, then you will lose a certain edge in your coin purchasing efforts. You might still find coins to be a very profitable investment, just as a very knowledgeable investor can still lose money due to bad timing or bad luck. However, the more time you are willing to devote to your education, the more successful you are likely to be. No matter how competent and honest your coin dealer is, he is not going to be able to help you maximize value for your money the way you could yourself if you knew how to grade coins. Grading is at least partially subjective. Every dealer has purchased and sold both undergraded and overgraded coins. Even if you buy only certified coins, you are better off knowing how to grade coins. How else can you tell whether or not a coin is really PQ (Premium Quality) for the grade? Let's face facts. It is human nature for a dealer to give his own coin the "benefit of the doubt." Sure, you could get lucky and buy a coin that's been slightly undergraded. But that's going to happen less often than the other way around. The best coins are the ones that are most likely to sell before you ever have a chance to buy them.

Don't be discouraged if you don't think you can ever become an expert. Nobody alive knows everything there is to know about coin grading (or golf, or practically anything else). Just remember: In the long run, the more you know the better you are likely to do financially with coins.

Read this book carefully. Start by reading the GLOSSARY. You will probably find it helpful to refer to the GLOSSARY as you read the rest of this book. Then you will have, as your basic foundation, a fundamental understanding of how grading works. After this is accomplished, the best way to continue and really learn how to grade is to attend an auction or a coin show and look at a LOT of coins.

Now for those of you who are ready to jump in and begin to learn, let me offer you some final advice: don't be a know-it-all! No matter how many times you read this book, you still won't know one tenth as much as most dealers who have gone to numerous coin shows and auctions, and have spent entire days at a time just looking at coins. Until you really know coins, don't contradict anything that a dealer tells you, or volunteer an opinion. You can't possibly learn everything you need to know about grading from any book. There's plenty of information that isn't in this book which could explain why that dealer's coin might be MS-65 even though you're positive it's only MS-63 (or AU-55). If you have any doubts, you're perfectly within your rights not to buy the coin. The best part is that you're not expected to give a reason.

Also, if you spend a few hours looking through a firm's auction lots, or take 20 minutes of a dealer's time while he shows you coins, you should feel some obligation to at least try to buy something. If possible, find something relatively inexpensive that you happen to like. It is only fair. And you'll learn something about how that dealer does business as well.

The best place to look at a lot of coins with a minimum of hassle is at a major rare coin auction. You can easily look at hundreds of mint state and proof coins in a single sitting. Purchase a copy of the catalog and compare the coins to the descriptions. Test how you tend to grade the coins in relation to the cataloger. Pay particular attention to the P.C.G.S. and N.G.C. graded coins, as these will nearly always be the most consistently graded. If you think a coin is vastly overgraded or undergraded, make a discreet note in your catalog. Then see what price the coin brings. Does the market agree or disagree with you? (There are numerous reasons why the auction price realized may not, in some cases, be a fair representation of the market. Still, this exercise will be a very useful part of your learning process).

Always try to look at coins under similar conditions. This is especially true with regard to lighting and magnification. For example, I always try to look at coins under a 100 watt incandescent lightbulb. However, a 60 or 75 watt bulb, or a tensor lamp is also perfectly acceptable, so long as you always use the same type light and intensity. I prefer approximately a 5X magnifying glass when looking at proof coins or coins smaller than a dime, and no magnification for anything else. I suppose you can get accustomed to any kind of magnification, but I feel that too much magnification is confusing.

In most cases, the coins you look at will either be in P.C.G.S. or N.G.C. holders or be contained in some sort of plastic "flips." It isn't reasonable to expect a dealer or auctioneer to remove the coins from these flips, as the coins can easily become damaged through mishandling. Sometimes the plastic will develop hairlines, and I find that a 5X magnifying glass is very useful for determining whether the hairlines are on the plastic or on the coin. If you still can't tell, gently move the coin within the flip to distinguish whether hairlines, spots, etc. belong to the flip or to the coin itself.

If you are given the opportunity to look at a group of coins outside of their flips (or when you're studying your own coins), be sure to handle them very carefully, BY THE EDGES ONLY. At no time should your fingers ever touch the obverse or reverse surfaces of a coin. Always view your coins over a soft surface such as a felt pad or towel. That way, if you should ever drop a coin, it probably won't be damaged.

Finally, the best way to see how well you're doing at mastering grading is to actually send some of your purchases to the P.C.G.S. or N.G.C. grading services. Compare your opinion to theirs. I realize that there are other competent grading services. However, since the standards you are about to learn from this book are the P.C.G.S. and N.G.C. standards, it is best, for the sake of consistency, that you use P.C.G.S. and N.G.C. for this purpose. It is hoped that as you gain experience, your grading will tend to coincide with theirs. Once you find yourself in agreement with them 85-90% of the time (that's approximately their own consistency rate; i.e.. the percentage of the time they grade each coin the same, since no one is 100% consistent), you won't need this book any more!

"Money can't buy happiness, but it can buy you the kind of misery you prefer."
- Author unknown

Even with today's expanded numerical system, there are only I I mint state grades (60,61, 62, 63, 64, 65, 66, 67, 68,69 and 70). Yet if you had 1,000 or more of the same coin, all in uncirculated condition, it would be theoretically possible to rank them in order from best to worst. Therefore some MS-63's for example are going to be just barely MS-63, while others may be very close to MS-64. Naturally, the latter coins may command a significant premium over the former.

The trick now is to be able to distinguish a premium quality coin from a low-end coin.

It can be very helpful to know how to grade so that you can tell when a correctly graded coin is at the higher or lower end of that grade. As I have stated previously, you can never learn it all. But clearly, the more you know about grading, the better off you are. This is the real value of the third party grading opinion and of your own knowledge. Both are subjective, and certainly nowhere near foolproof. However, both can be important tools that can help improve your chances of success.

"Don't hurry, don't worry. You're only here for a short visit. So be sure to stop and smell the flowers." - From the New York Times, 5/22/77

One last bit of wisdom; As long as you're going to this much trouble, please don't forget to enjoy coins. Not only will enjoyment make the learning easier, but it also should become an end in itself. People collect because coins are interesting and fun! The best way to understand the collector mentality is to become a collector yourself. Even if you don't make a profit, at least you will have received something for your trouble. It's a funny thing though. As you learn more about coins, and start to buy the coins that appeal most to you, your judgments will start to coincide with the future of the coin market. Collectors often seem to be one step ahead of the investors. They usually have a better instinct for value. Collectors are the underlying basis of the coin market, a fact of which investors so often lose sight. To improve their chances of success, investors should try to predict which coins will be the most sought after by collectors ten or twenty years from now. Therefore, it really isn't so surprising that the most committed, passionate collectors often realize a better financial return when they sell their coins than many serious investors do.

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