Card Graders vs. Credit Rating Agencies

[ejharrington]

There are a lot of shady characters in this hobby. I don't think anyone would deny that. It's no different than the stock market / government / etc.

After the 2008 financial meltdown there were a lot of villians identified. But I always have thought the worst offenders were the credit rating agencies that put their stamp of approval on mortgage-backed securities that should have been rated as junk. Their only job was to do due diligence and they failed, either out of complacency or corruption or both.

There is a lot of shady stuff that goes on in this hobby. Card alteration, shill bidding, stolen cards, fake autographs, "game used" jerseys that really aren't, etc. But, to me, if altered and/or marked cards are being overgraded by PSA/SGC that is the single "bad act" that can ruin the hobby through erosion of confidence ultimately cost a lot of people lots of money.

As a relatively new person to the hobby, I put faith in the grades PSA/SGC give. I don't buy ungraded cards just because I know I don't have the knowledge to determine if a card is fake, altered, etc.

High priced cards / expensive autographs should be given extra scrutiny by the grading companies, even if it means a higher cost to do so.

[ullmandds]

good points...and I agree that the TPG'ers have turned this hobby into a "house of cards!"

[glchen]

I don't think this is the best analogy. The major TPG's back up their grades. That is, if they make an error, they will compensate the owner of the card the difference between the price that the owner purchased the card for and the market value for the card at the revised grade. Credit rating agencies obviously don't offer any kind of compensation if the rating that they provided proved incorrect.

[Peter_Spaeth]

Originally Posted by glchen

I don't think this is the best analogy. The major TPG's back up their grades. That is, if they make an error, they will compensate the owner of the card the difference between the price that the owner purchased the card for and the market value for the card at the revised grade. Credit rating agencies obviously don't offer any kind of compensation if the rating that they provided proved incorrect.

Yeah, IF they acknowledge the error. Big IF. "The graders stand behind the grade."

Just look at David Hall's defense of the Wagner.

[bnorth]

Originally Posted by glchen

I don't think this is the best analogy. The major TPG's back up their grades. That is, if they make an error, they will compensate the owner of the card the difference between the price that the owner purchased the card for and the market value for the card at the revised grade. Credit rating agencies obviously don't offer any kind of compensation if the rating that they provided proved incorrect.

I have never read PSA's guarantee but i have read SGC's and it is a joke at best. Everthing is at their discretion.

[glchen]

Originally Posted by bnorth

I have never read PSA's guarantee but i have read SGC's and it is a joke at best. Everthing is at their discretion.

I've used SGC's guarantee before, and let me just say that they were extremely fair. If someone has had a bad experience taking SGC up on this, it would be news to me.

[bnorth]

Originally Posted by glchen

I've used SGC's guarantee before, and let me just say that they were extremely fair. If someone has had a bad experience taking SGC up on this, it would be news to me.

That is good to know Gary. I just found the way it is worded very one sided.
Here is a copy of it.

SGC Guarantees that all cards submitted shall be graded by SGC grading experts in accordance with SGC grading procedures. In the event the owner of an SGC card believes that the card has been overgraded with respect to such procedures, the owner may resubmit the card to SGC for a review of the assigned grade.

If the grade determined under such review is lower than that originally assigned to the card, SGC shall, at SGC's discretion, either replace the card or pay the difference between the current fair market value of the card at the newly established grade and the current fair market value of the grade originally assigned to such card, in the form of either cash or grading credit. Due to the volatile nature of the sportscard market and Internet auctions/sales, the selling prices in these auctions do not necessarily represent the current fair market value of any particular sportscard. SGC will determine the current fair market value of a card which is assigned a lower grade on review, based upon what SGC believes to be reliable current market information. Clerical errors with respect to the description or grade of the card(s) which would be obvious upon inspection shall not be subject to the SGC guarantee stated herein.

[bcornell]

Originally Posted by ejharrington

As a relatively new person to the hobby, I put faith in the grades PSA/SGC give. I don't buy ungraded cards just because I know I don't have the knowledge to determine if a card is fake, altered, etc.

The percentage of TPG mis-graded cards (intentional or not) is very small. The grading companies exist primarily because of the shenanigans that went on before. James Copeland, for one, certainly could have used them: I waved money at Bill Mastro and high grade cards appeared.

Bill

[Peter_Spaeth]

It may be small in percentage terms, if you include all the huge numbers of inexpensive cards that have been slabbed, but I would bet there are many millions of dollars of altered cards in holders.

[rgpete]

Anybody can start a sports card grading company, not regulated or insurance required for grading error, but insurance most likely needed for theft etc when in their possession. So the card grading companies can make there own rules and its only their opinion what the grade is. Just remember a card just money on paper and is only worth what someone is willing to pay whether slabbed or raw at that time, Also it always come down to doing your research and if not sure about the card walk away.

[drcy]

Skip the 9 and 10 idiocy and collect mid and low grade cards. PSA and SGC and reliable about authentication and there are lots of great low grade cards to collect.

[glchen]

Ben, I think companies like SGC have to put that verbiage there to protect themselves. There are some cards that are not sold frequently, so even if you used something like VCP, you will see highs and lows, or there might not have been a recorded sale of that card at that grade for years. Therefore, that wording gives them some flexibility on what the price should be rather than having to be pinned down to a sale price that may be many years old and not reflect what is reasonable in the current market. As I said in my situation, SGC was very fair, and as long as you come into it that way, you'll be happy with the outcome. Obviously, SGC has been noted as having superior customer service by many people for a good reason.

[Bored5000]

Obviously, the third-party grading companies are not a perfect solution. Mistakes and bizarre grades happen at times. But I think the TPGs are a net positive to the alternative: a Wild West type of situation in which every card is "mint" in the eyes of a seller and "good" in the eyes of a buyer.

That being said. the price disparity between a card graded one grade higher or one grade lower is shocking at times, especially with the nonsense of "highest graded example."

[tschock]

Originally Posted by Bored5000

But I think the TPGs are a net positive to the alternative: a Wild West type of situation in which every card is "mint" in the eyes of a seller and "good" in the eyes of a buyer.

Ignoring authentication for the moment, the TPGs should be viewed merely as an unbiased, third opinion, provided to both the buyer and seller when negotiating a transaction. Too often however, their opinion is held as gospel.

Whether or not they are truly unbiased is debatable as well.

[Beastmode]

Good analogy. There certainly are some similarities. Lot more exposure for credit rating agencies. I think (S and P?) was fined $2B last year for bad reviews. Feds are not going to fine TPG's as far as I know.

It's an interesting lesson we learned about Wall Street. I can remember the people getting mortgages and refinancing their houses that had no business owning a house or taking out equity. These mortgages were repackaged as "A" grade to investors (PSA 10's anyone?)

If you invested in that crap because some suit in New York gave it an "A" grade, I just can't feel sorry for you. Granted, it was probably your mutual fund or pension plan that ponied up your money to give to their golden boy buddies on Wall Street. When it's someone else's money, it never ends up good.

As for TPG's, theres been some good threads on here about the TPG review process, alterations of cards, etc. That is all golden information to use when you "invest" in cards. Education, not legislation

There is RISK in anything you invest in, even if you put your money in a mattress (fire). I'm dumbfounded but an entire generation of citizens that blame the banks and govt. when the stock market goes down and they lose some money. Unfortunately, we teach kids cursive in school still, not risk management.

Collecting graded cards can be enjoyable and prosperous, but know that it can swing the other way with a wicked current. And when it does, PM me and I'll buy your vintage PSA 9's.

[glynparson]

They are and the millions they've made some doctors things are still better than before grading started as far as number of bad cards out there. Counterfeits are way down and many of the same card doctors were doctors before grading.

[tjb1952tjb]

No one remembers Barney Frank?

[ls7plus]

Originally Posted by bcornell

The percentage of TPG mis-graded cards (intentional or not) is very small. The grading companies exist primarily because of the shenanigans that went on before. James Copeland, for one, certainly could have used them: I waved money at Bill Mastro and high grade cards appeared.

Bill

+1 especially re the second sentence above. I don't know how many of you were avid collectors in the late '80's/early '90's, but it was pretty much the wild, wild, lawless west. Paper pressed and trimmed cards; black crayoned tips on 1971 Topps cards, counterfeits, etc. I went to shows with a 16x loupe to examine the edges (pressed and trimmed cards, though measuring correctly, had razor-sharp edges, as compared to the factory rough edge), and many dealers did the same when offered cards to buy!

While nothing will ever be perfect, may your collecting bring you much happiness,

Larry