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I take it to mean that CAC agrees with the grade on the given slab, nothing more then another opinion on the coins grade, IMHO.
Exactly. CAC was formed by a consortium of dealers who were tired of the inconsistency of
TPG grading - on this forum alone you can find dozens of examples of TPG-slabbed coins which the membership grades two or three points below the slab. Theoretically, the CAC sticker on a coin verifies that it not only meets acceptable standards for the listed grade, but is further at the upper end of the scale for that grade.
The whole
TPG process is founded on the idea that a reliable grade from a reliable grader makes sight-unseen, dealer-to-dealer and dealer-customer sales more viable. It hasn't been working that way, though, because of the inconsistency of
TPG grading, and their failure to recognize the differences in quality of coins which actually do qualify for a given grade. Dealers and advanced collectors tend to use a 3-step scale to differentiate the quality of a coin at a given grade (A, B and C) with A coins being at the top of their grade on technical merit and eye appeal. An A coin should command a higher price than a C coin, and this system predates
TPG grading.
Of course, it's more about the A coins than the C coins, and more about a good MS65 selling for a good MS65 price rather than low-end-for-the-grade coins dragging the market value down. This is where CAC comes in.
Now, your first thought might be, "Isn't this just a bunch of dealers trying to make a market?"
Yep. That's exactly what it is. They're tired of seeing low-end coins defining market value, all the worse because you and I don't want a low-end MS65 for our collection; we want the best possible coin at the grade. The CAC sticker on a coin means that CAC member dealers will willingly buy that coin in that grade at the going price. CAC has a certain amount of capitalization ($25 million) to back the guarantee, and it's their money - unlike
TPG's, whose balance sheet is complete when they grade a coin, CAC stickers are a financial commitment by CAC itself. If they screw up and sticker poor coins, they'll end up owning them at a price they can't recoup.
In the words of John Albanese, the founder and major backer of CAC,
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Let's say that we do a poor job. If we do than we have to buy our own coins back and we wouldn't last very long. We could have $25 million of low-end unsalable inventory and be out of business. So it's in CAC's best interest to maintain the standard because we are consuming our own product. It's like owning a restaurant where we eat every meal, so we're not going to be serving poor quality food. Or it's like a prospective home buying desiring to buy a "builder's home." Why is that? - because he built it for himself. In effect, we're grading for ourselves
As I've said, the system predates
TPG's. There have always beem "low-end" and high-end" MS65's, and discerning collectors have always been hesitant to pay MS65 money for a low-end coin. The
TPG's, aside NGC's "star" rating, have never addressed that practice. CAC is.
For the record, I remain unconvinced that it's going to work in the long-term, and very little of CAC's intent hits me where
I collect. But, if you're a buyer who isn't afraid to spend $2500 on a coin, and more importantly might bring a $2500 coin to a dealer to trade for an upgrade, chances are CAC's efforts will help you. If it works.
Posted 09/27/2009 10:31 pm
