Private note grading ruining the hobby?

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In my humble opinion, I would never treat notes as an investment. I'm doing way better with my investments, than I could ever do with notes. Think hockey cards in the 90's. They were supposed to be an "investment" too. No thank you, the Royal Bank, Tim Hortons and Canadian Tire get my investment money long before a Devil's Face $100, or a $25 bill. I've read the term market prices a few times in this thread, and it brings a couple of points to mind. The first is, we are living in an era of "easy money" and high liquidity with lots of money chasing riskier and riskier investments trying for higher and higher returns. With this in mind TPG begins to look like a vehicle to verify or lock high priced notes in at specifc price levels. It is not running "the market", but is instead a tool created by "the market" to satisfy a specific need. TPG will not save the price of bills if the market falls, and those notes may fall the hardest (Duth tulips, dot com stocks, Toyko real estate to name a few). The real test of TPG is going to be in getting market acceptance, will people use the service? Some peopel are, but will they use it after a down turn (will happen) and those users realize that it didn't protect their investment. Will note investors keep their nerve in the face of falling prices, lower returns, and mounting loses? It may also serve the function of splitting the note market into two seperate segments, true collectors and investors. As a collector I would never use the service, as the simple UNC, AU, EF, F, VG, G system works for me. It is also unlikely that I would ever buy a TPG note, as I am only buying it to have it, so there is no reason to worry about protecting my investment. Kind of like buying beer. I don't think TPG is ruining the hobby, but it may very well change it. This is the point where we as a community decide what role we want to play on an individual level. I am a collector and the best case scenario for me is that in the distant future a grand child or grand children get a note collection to admire and continue, or they get their university paid for with the proceeds of it's sale. Someone else can worry about that.

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Quote:
"I have no doubt that there are some collectors who cling to their Charlton bibles and believe the only right price is the one printed in a catalogue.  They are entitled to their opinions and they are also entitled to miss opportunities to buy notes that are underpriced in the catalogue when they become available on the "free market".  However, how does this "free market" work in explaining how certain individuals are putting notes in their stores at mark-ups of several times the catalogue and well clear of any "free market" prices realized in the recent past?  We're not talking just *V/V notes and anything else that costs over 10k.  We're talking bird series radars for $200+, we're talking low to mid-grade Princess Pat $1 notes at double catalogue, etc."
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I think you've answered your own question.The free market allows the seller to list at whatever they wish,whether fair to you or me aside.But in a free market,you and I chose to pass on the sale of said notes,so the seller re-lists,or lowers the price till a sale is made. Indeed we're not just talking 10k plus notes,but listing price in a free market is neither here nor there.

Quote.
"So how do these overpriced notes sitting in some eBay sellers' stores for 12-18 months at a time on a constant spin cycle have any relation to the "free market"?  What is this free market, anyway?"

Please see above.

Quote:
"Like I said in another post, I don't want to have my uncertified notes pulled down in value because buyers are gradually becoming suspicious of anything NOT in a PMG holder. "

That is a concern I concur with,will ungraded notes lose credibility with new buyers? That is/could become a major problem.

Quote:
"I think you're dead wrong.  Many people treat this as a hobby, not a portfolio.  You're out of touch with the average collector, my friend. "

Yes,I agree wholeheartedly,about treating this as a hobby that is.You stated I'm out of touch with the average collector---oh really?Let's examine this for a moment shall we.You may even wish to look at your own thoughts and conclusions again.

I started in this hobby,fascinated with paper money,in 1991 or thereabouts.Loved the designs,colours,ect of 1954 series and older,more than the modern notes.
I bought an Original Unc 1935 $100 for,if memory serves correctly, $1500.That note today is worth $9500.00.
At the time of purchase I had no idea of investment potential or percentage returns of paper money.Yet,had someone told me I could buy that note in 1 years time(1993) for $750.00,a 50% discount I would have been a fool and daft to pay a 50% premium to own this note when in a years time I could receive two for my viewing pleasure!

Stay with me here.Let's look at another example.The 1954 Mod.$2.00 *OG.In 2003 15th Charlton this note is valued at $55.00.Move forward to the 2007 Charlton 19th Edition.The same note is now valued at $90.00.
If I purchased this note 4 years ago,do I expect my money to just stagnate and lose value?Should this note have dropped to $25.00 today would I be happy looking at it as a wise addition to my collection at the time?I think not.
Shoulda waited 4 years and added the note 50% lower.

There are examples of course where notes have dropped in value,and a balance is achieved because of the notes that rise in value.
So my point is,WE ALL look at this as investment potential,whether admitted or not.To do anything less would be a dis-service to ourselves and our families.The joy of this hobby is a given.Making money at something you love and enjoy is a privilege.
What would our(grand) children think if we left them an inheritance worth half the value of the purchase price of all our goods? Of course this takes place in many areas,furniture,cars,clothes ect. Not in our homes,investments--and paper money is an investment.It may be secondary to the love of the hobby,but it is an investment.

Otherwise why not sell your notes for book 2003 17th Edition prices.I've yet to see a hobbyist/collector do that!

It's not all about the money.Just ask a forum member I met at the Feb Torex.He's young,intelligent,and fun.Also a skilled negotiator! I sold him 12 consecutive notes that have current book of $180.each.
After alot of fun,I parted with them at 30% below book.I know full well I could have waited and received well over current book value.Especially if I TPG'd them.
I do not need the money,actually didnt even WANT the money.Yet it was with a great deal of satisfaction that we made this transaction-because I liked him,plain and simple.I suppose that is the hobby part of this paper collecting we do..
And the free market in action-sometimes we go up,sometimes we go down.

rachelsprivates,I thought you'd respond to my post.I'm truly glad you did,you always give me pause to consider another side.And I might add,you articulate your thoughts with facts and opinions that any thinking individual must consider if they wish to learn and grow.

I'm very interested in hearing others opinions-Is this purely a hobby,or is it a hobby with investment potential? Will TPG'd notes add to your returns? What are your expectations with your notes?Do you care if you lost 50% on a purchase?Lord knows I have, even 70% on some.



 

I can certainly understand why some people like to have their notes certified by PMG or other grading companies. Firstly, it probably makes it easier for sellers to sell their notes online. Secondly, it may make buyers more confident when buying an item online. That's all well and good and entirely understandable. However, I ABSOLUTELY CANNOT UNDERSTAND why a PMG graded note should be worth 50% or more than the same uncertified note!! It's sheer lunacy in my opinion. I can understand adding on the cost of the certification, or perhaps $50, but when I see comments on eBay such as "Grab these PMG graded Canadian notes before they get out of sight! " I'm at a total loss. Is it the note or the holder that is being sold?

To summarize, I can understand that third-party grading may FACILITATE A SALE, but I cannot for the life of me understand why a PMG certified note should be worth 50% or more than an uncertified note, especially since PMG grades tend to be at least half a grade higher than their Canadian counterparts.

A "PMG-67" $1 1937 Coyne-Towers note recently sold for CDN$405.00 on eBay (the Charlton catalogue value is a mere CDN$70.00 in Unc!!). Was the high bidder paying for the note itself or for the grade stated on the holder??  A big problem with TPG notes is that you really cannot verify the grade on the holder without cutting the note out of the holder, i.e., you don't know for sure what you're actually getting. The large majority of PMG graded notes that I've seen on eBay (including two that I actually purchased) have been overgraded by at least half a grade in my opinion (relative to Canadian grading standards). For example, I recently saw a note that was graded by PMG as "AU" that had clearly rounded corners ....

Hamner,here's another point of view I lifted from a U.S seller of $500-$10,000 notes.He describes his business as the largest US seller of large denomination notes:

"Over the last several years millions of dollars have been pouring into numismatics as thousands of dealers, collectors, and frankly, investors feel that this is one of the best markets for cash reserves. In addition, the potential for profits is well above any other form of savings or investing. Granted, you need to take baby steps as you learn ; it is a tricky business and we all need to learn which coins have potential versus the ones that may remain stagnant or dwindle in value over time. As intelligent buyers you need to know which grading services command the greatest respect and potentially the highest value for your coins. This is one of the easiest aspects of the coin business. Simply call around the country and ask dealers which coins they favor when it comes to buying and selling. The overwhelming answer is NGC and PCGS. Any other grading service is normally discounted from these two services.

He also states that NEW collectors should and MUST buy TPG'd notes as a safety net against fraud.

You also stated:
"No thank you, the Royal Bank, Tim Hortons and Canadian Tire get my investment money long before a Devil's Face $100, or a $25 bill. I've read the term market prices a few times in this thread, and it brings a couple of points to mind. The first is, we are living in an era of "easy money" and high liquidity"

As a student of the markets(I make a living via the markets),I can tell you your examples do NOT quite tell the whole story.TIM HORTONS FOR EXAMPLE:Started trading in April 06.Had you bought that very day at the LOW you'd have paid $29.92 cnd. Had you sold at Fridays average trades of $35.00,with a .28cent dividend yoy.returns realized might be in the neighbourhood of 20%.Not bad but not enough history to judge as a long term investment.Also there are Capital Gain taxes and numerous other factors to consider when calculating the overall net return to any individual.I have my thoughts but........Lets take a note,the C/T DF $100 in Unc --the 06 to 07 prices gives us approx. 20% return.
Let's look at Royal Bank,something with a much longer history.In 2001 Royal could be had for about $24 dollars.At Fridays close of $56 and change returns in the last 6 years,minus dividends = about 144%.
As we are comparing blue chip stocks,let's compare the same DF note price in 2001,at $300.00.At $975 that is a return of about 230%.
Canadian Tire has been a horrific stock story the last 52 weeks.Had you bought last April at $132.00 you'd have lost approx.$44,000 dollars for EVERY 1000 shares you owned!!! at a close of $88.00 on Friday.
Going back to April, 01 CTC.TO could be had at $38.00.With Fridays close your return minus any dividends comes out to 130%,excluding Capital Gains and various other factors to net you a return.

All said and done,notes can return a high percentage for investment purposes.Dont even get me started on the nightmare of Mutual Fund losses that took place in years past if you owned them more than the last 15 years.

Best to spread a little here and there,eggs in several baskets.

Nicely said twoinvallarta  

I don't dispute that the "free market" allows anyone to ask any price of any note.  The problem I am seeing is that some people are being influenced by the asking prices, and the dividing line between what a note is realistically worth and what the high-profile sellers are asking for their notes is being blurred.  The Charlton catalogue has resisted the temptation to take into account what some dealers are asking when determining value.  This is right in my opinion.  You can't let speculation become the new reality.  There are certain sellers who would rewrite the catalogues to suit their deluded ideas of what some notes are worth.  If we start believing a note is worth whatever someone sais it is worth,  not what someone is willing to pay,  then the hobby is lost.

I agree with the comments made by Ottawa.  What are we accomplishing by putting notes in fancy holders?  The high prices being realized for TPG notes may be a knee-jerk response to something new and exciting, but if it ever becomes widely known that TPG notes are not all they are purported to be, watch out below.

Let us not forget that the notes sought by collectors and investors come from the same pool of existing notes.  Putting a note in a TPG holder does not change the note itself.  Merely our perception of the note changes.  Amazing as it may seem, taking a note out of a TPG sealed holder yields the same note that went into the holder.

Sorry. I wanted to quote the last sentence in rachelsprivates' post but accidentally posted the whole comment.

I have often wondered whether the note coming out of the holder is the same one as the one going in.  What are the effects over time.  Say a note with foxing is sealed.  Does the fungi grow in the anaerobic environment inside the holder and compound the foxing?

Do notes get pressed inside the holder with passage of long periods of time?

Indeed

Ok, Canadian Tire may not have been the best example (don't actually own those). Investing in the market is about hitting singles, lot of singles. The Royal Bank was actually a double for me, bought in a good price watched it rise, and then it split (cha ching)  . I too have mutual fund horror stories, and then well Nortel and Bombardier (ouch and ouch). Hit a homer with Telus 800% before dividends. In my view, paper money is not an investment. While the figures you quote are very nice, the DF note is not nearly as liquid as the stocks are. Royal Bank stocks can be sold at a profit in minutes if something better comes along. You cannot move a DF $100 like that, and an oppourtunity is lost. Oppourtunity costs are hidden, but run the numbers and they can be scary. In addition a DF $100 cannot be used in the financial market place as collateral to open a margin account, buy a house, open an RRSP, RESP, or get your friend or yourself out of jail. To "the market" outside of collectors it's worth $100.

I also don't see the point in spending $20 (don't even know the cost of this service) to get a Birds $5 RADAR note graded, that I paid $15 for? It's worth $5 worst case scenario, what value is there to protect? I purchased a very nice $50 Journey insert/change over for $75, from a forum member. Is there any value in increasing the cost of this item by a further 25%? Again, if the market tanks, it's worth $50 and no TPG certification is going to protect the value of this bill in a down market.  

At the same time nothing I've read in this thread indicates to me that there is consistent grading practises among TPG's. The quote you put in from the coin dealer "He also states that NEW collectors should and MUST buy TPG'd notes as a safety net against fraud." reinforces that only TPG grading can be trusted. I might say, check your source. It is in a dealers best interest to make a statement like that, that is their business after all and TPG items command a greater markup. I'd trust the grading of most forum members (including yours by the way) ahead of any TPG company grading Canadian paper.

The crux of this discussion comes down to two very different points of view, based on different experiences. From other posts you've made, I'm quite sure you and I are not in the same league in terms of collecting paper money. For the notes you are buying, TPG may be an instrument to ensure a certain price level for higher value items. For me and the small money put in, it offers little or no value and only adds to the overall expense of hobby. It is an expensive hobby, even at the small level I deal at. This also reinforces what I said earlier, maybe TPG breaks the hobby into two segments, those who collect and those who invest. This does not mean that if you fall into the invest category, that you cannot enjoy collecting too.

In my mind if someone offered me $100 000 in liquid non collectable money or the same in DF $100's, I'd be taking the boring stuff and paying off my house, dropping some in boring Royal Bank stocks, and building a sauna at camp on the Manitoulin Island.

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All markets move in cycles.  The price of real estate in New York in 1973 was lower than the price in 1929.  That is a LONG time to wait to break even on what is considered a traditional "investment" although of course you need a house to live in and it generally serves a primary purpose other than investment.  Those who have invested in mutual funds over the past 12-15 years have recently just broken even in the past year or two.  So stocks are not as liquid as they seem unless you plan to get out regardless of what loss you want to take.  The past few years in the stock market should not be taken as the usual course of events.   Notes always have a buyer in a fire sale as well.

I forgot to add that if anyone needs a reminder of how stock markets behave, recall the day in spring 2000 I believe, when the Nasdaq dropped 25% in a few hours.  It was horrific to watch.  In a bear market, ALL stocks get killed, the good with the bad. In those bear markets, liquidity is not a good thing because prices plummet while illiquid investments drop in value more slowly as they just do not sell.  eg, with the recent slowdown in housing in the US, prices have not plummeted, just come down a bit because people do not dump their real estate like they dump stocks.  Now if the same sentiment were applied to the stock market, prices would plummet.

I guess we're veering pretty far off course

The title thread " Private Note Grading Ruining The Hobby "

I only deleved into this thread because PMG seems to be the primary 3rd party grader
and I have not been happy.

There is nothing wrong with 3rd party grading. I see it as being a useful tool. But they have to know how to grade.

A Canadian company with a high profile would be a good thing. Someone who grades by Canadian Standards.

Suggest you use Andy McKaig for grading Canadian Paper Money, rather than a foreign grading company.

Rick

Hi Rick,

Question:I agree Andy McKaig is better than foreign companies.I've met him,found him knowledgeable,personable,likeable,and helpful.
Someone put in my mind once that the problem with Andrews grading company is the fact he sells notes,he grades them himself only.with no second or third opinions.
How would you address this?
Thanks for any insight you can provide

I forgot to add that if anyone needs a reminder of how stock markets behave, recall the day in spring 2000 I believe, when the Nasdaq dropped 25% in a few hours.  It was horrific to watch.  In a bear market, ALL stocks get killed, the good with the bad. In those bear markets, liquidity is not a good thing because prices plummet while illiquid investments drop in value more slowly as they just do not sell.  eg, with the recent slowdown in housing in the US, prices have not plummeted, just come down a bit because people do not dump their real estate like they dump stocks.  Now if the same sentiment were applied to the stock market, prices would plummet.

Agreed jasper.This is shark infested territory,where the billionaires play,where trillions of dollars exchange hands every day world wide.The manipulation in stocks goes on everyday.It is designed to seperate the novice from his money on a continual basis.
Unless you know how things work,and I MEAN REALLY WORK behind the scenes you'd best stay away.Consider RRSP's,biggest scam going,and the gov knows it.
Wanna be a player?? When you can answer what derivatives are,black box selling,when you can tell me what Iceberg selling is(look out below!),how lease rates on the yen effect Canadian miners,when you understand market maker holding of tickets,when you graspgold going up,the US dollar going up,oil up,and Canadian miners down,you have STARTED to get a small grasp on the market. If you can wrap your mind around why Microsoft MSFT traded at $22 recently,yet they have a larger market share,higher revenues,and bigger profits than when they traded $40.00.you're getting a start on the issues(It had to do with Gates,his actions).
It is infested,not invested and anyone who made money and kept it is either privvy to the info or is just plain lucky.But luck runs out.
As a very knowledgeable insider once told me" If you play in another mans game,you will eventually lose."

I'll invest in paper notes,heck even TPG graded notes before I throw money at a dart board called the stock market.I make my living from it but I do not buy deals I'm not involved in.Its really not what you know,but who you know.....but I digress....

TPG has "hot" money flowing into it,just as we follow money flow into stock markets,I see huge money flows in to paper money and droplets going to TPG notes...we shall see...but it's not a bubble.....yet!

PMG and the other American grading companies must surely know that their grading standards (i.e., American grading standards) are significantly different from the grading standards prevailing in some other countries. It is well established that grading standards in Australia, Canada and Europe (especially Scandinavia) are much stricter than in the United States. This is a demonstrated fact, not idle gossip! It doesn't mean that American standards are bad, it just means that they're different. The most important thing is that buyers know exactly what to expect when they buy, for example, a "PMG AU-58" note (is it a Canadian EF or a Canadian AU?) And what about a "PMG AU-50"? (is that only a VF+ on the Canadian scale??)

In view of the above, whenever PMG is grading non-American paper money I feel that it behooves them to print some sort of disclaimer or warning on the back of their plastic holders, for example something like this:

"This item has been graded by PMG according to established American grading standards. It is important to remember that grading standards in some countries may differ from those prevailing in the United States."

The only thing I personally like about PMG grading is the high-quality plastic holders! Unfortunately, though, I like to actually touch my notes from time to time and grade them by holding them up obliquely to real sunlight. You just can't do these things when the note is encased in plastic. It seems to me that it is inevitable that a large proportion of TPG notes will eventually be removed from their holders by inquisitive collectors ......  8-)