Graded Stamps

I have this thing about stamp grading.  It is not a coincidencee that its rise correlates with the decline of stamp collecting, organized philately and philatelic expertise.  So I have written a few opinion pieces on the subject, some serious, many sarcastic.  I'm collecting them all here.  


2024/11/11: Graded Stamps: Finally, A Properly Grated Stamp


Issued in 2023 to encourage the west to sell or provide Ukraine with F16s to help fight the Russians, the stamp depicts the Kremlin being grated using an F16-patterned cheese grater.  Finally, a grated stamp I can support.

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2009/05/09:  Graded Stamps: Graded Revenues

1898 Revenues is pleased to announce its new stamp grading program. After careful consideration and a survey of the revenue stamp market, it is clear that this type of service, so popular with postage stamps, is now suitable for the revenue stamp market. Demand is high for graded postage stamps, even in the current economy. We believe that in only a short period of time that we will enable the full erosion of revenue stamp collecting and can hand the high end of the hobby to speculators, just has been done to US postage stamps!


Above is our first graded revenue stamp. The 1 1/4 cent proprietary has been graded at 100BJQ, the highest grade possible for a revenue stamp. Our team of grading experts, using strict and formal criteria, have combined their skilled judgment with a process that includes high-cost electron microscopy techniques and x-rays at zero-gravity to insure that the stamp, even on the inside, is true to the grade for which it is assigned. Margins are well balanced and wide. The color is bright and nearly fluorescent. The impression is sharp and clear. You are unlikely to find a battleship revenue of this quality in a lifetime (of a fruit fly).

This is a very important stamp. It is important because we say it is. Isn't contrived scarcity, manipulated right in everybody's faces great? We figure the public will get suckered by this nonsense for years, about the same amount of time it took before the stamp market boom of the late 70s collapsed in the early 80s.
But we digress. Back to this very important stamp.

Catalogue value: $00.2
We are pleased to make this stamp available for $11,500.

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2009/7/26: Graded Stamps:  Degrade your collection with 1898 Revenues today!

Send your stamps today to 1898 Revenues to participate in our exclusive stamp collection degrading service. Whether you send us stamps that we grade at 90 or above, or the now obsolete and once thought collectable fine-very fine revenue or postage stamp, we'll degrade your collection better than any stamp grading service, and at a cheaper price. We'll make sure that you know that the typical stamps in your collection that you've spent a life putting together are not worth much, while a random stamp in your collection that we grade at 95 or higher might be worth more than everything else you own.

Let us degrade you and your collection today! Give us the power over you! Take a gamble that we can make you wealthy. Just like gold mining, the only people sure to get rich were selling miners the tools, clothes and food they needed. Give us a chance to get rich, and let us degrade your collection today.

Let's see what some satisfied customers have written:

I combed over my collection that took a lifetime to put together and sent 1898 Revenues my best stamps so they could expertly grade them. Of the 20 stamps I sent of the thousands in my collection, 3 came back graded 90 or higher. I felt degraded and very happy. Thank you 1898 Revenues!
---Richard Pliskin, Flushing N.Y.

I always got bad grades in school. But now I own my own 1898 Revenues Graded stamp! Thanks 1898!
---L.O.L., Altoona, PA

I've been collecting for years, but never felt complete until I started collecting 1898 Revenues Graded Stamps. I've spent nearly $5 million in the past year on graded stamps and I now have 462 little plastic cases of really pretty and neatly centered stamps. Gosh I love philately! Thanks for showing me what collecting and real philately is all about guys...
---Andrew Rockefeller Carnegie Vanderbilt VIII.

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2016/4/21:  A Degraded Battleship

Several years ago I wrote several posts about the curse of grading on the hobby of stamp collecting.  Those posts can be found here. 

 R163 "E Graded Superb 100"
Currently Buy It Now on Ebay for $100



"eGraded" as Superb 100 by eGrade, certificate 370.  Go out and buy this one right away.  And make sure you pay double because the price is so dang low -- hit "Make Offer" and enter 200 bucks you schmuck.

Geez.  I figured we wouldn't see much grading with revenue stamps, especially with a stamp that is worth about a tenth of a cent, like an R163 roulette.  At least this humble stamp has all sorts of cool incarnations and can be very collectible, given a range of cancels and uses on piece.  But this stamp is a prime example of taking that one in a couple of hundred stamps out of a pile of R163s and assigning to it a ridiculous description and price.  Like I wrote years ago, this stamp has its high value because of the grade and certificate, not because of its inherent worth as a well centered stamp.  The cert is rare.  Not the stamp.  This is clearly a case of a dealer fishing for suckers.  Are you one?

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2009/12/12:  Graded Stamps: Perpetuating the Decline of Stamp Collecting -- Absurd Valuations

Where does one start in a discussion of ridiculous prices and graded stamps?  There are some absurd situations, like that with the used and in-a-slab C19 below.  While the whole industry is overpriced, the stamp below is special:


XXXX
IMAGE REMOVED
[editor's note: as I recall, Jerry Connolly requested that this image be taken down]


Graded stamp for sale at Jerry Connolly Stamps.com
US C19 Used VF 2010 Scott Catalog Value:  25 cents
Jerry Connolly Price:  $575.00
Graded Stamp multiple over catalog:  2300 times VF catolog value

A common stamp that I might find in my grandpa's old shoe box is in a plastic case/slab with a PSE sticker.  The cancel is uninteresting, uncentered, and provides no information.  The stamp trades at VF for no more than a price that might allow a dealer to recover costs, and even then that is doubtful.  The truth here is that the intrinsic value of the plastic slab is nearly greater than the stamp inside.  Yes, yes, we have what salespeople in the business call a condition rarity.  Well this sort of condition traded for years before the advent of PSE and whoever else has jumped on the professional grading bandwagon.  Nearly 70 years of professional dealer and collector judgment would have never valued the stamp at more than a two digit multiple over its listed Scott Catalog value.  Indeed, most dealers would have sold it for the catalog price.  Yet here we have a stamp that Mr. Connolly will sell you for two thousand three hundred times the VF catalog price.  Maybe you should feel guilty the price is so low and offer him more.  Maybe three thousand times? 

The stamp market last experienced a value bubble in the mid to late 1970s, during a period of stagflation and poor stock market returns.  The broader collectibles market also rallied during those years.  But an almost democratic, across-the-board rally developed in stamps, very different than today's graded stamp market bubble, which dismisses most stamps as not grade worthy.  Somewhere in storage I have a pile of old Brookman price lists starting in 1976.  I don't know if they do now but then they came out semi-annually.  During that period price changes were staggering.  The staggering part wasn't so much the domain of certain classics.  It was the more common stamps that amazed.  I casually tracked the 6 cent Botanical Congress plate block.  I can't recall, but by 1980 it was priced by Brookman at somewhere near $20.  The Scott value today is $1.75.

There was even action in contemporary stamps.  The 1976 50 state flag issue was being purchased in bulk by dealers for nearly two times face in the immediate years following its issue.  I remember full page ads on Linn's back page by companies looking to buy the sheets.  Some of them may be the ones trying to sell you graded stamps today.  Across the board stamps went up, and the bull market had an impact on what the stamp trade today would call "postage" even more than it had on rare classics. 

But then the market collapsed.  Things went back to earth.  By the early 80s, and as inflation subsided, the speculative and irrationally exuberant money ran out of the stamp market.  The VF $2.00 MNH Prexie I bought for $55.00 around 1980 now is valued by Scott at $17.50.  Players in the broad market lost a ton in the value of their bulk inventories.  And the hopes were dashed of retirees and soon-to-be retirees across America that had purchased sheets of 3, 4, 5, and 6 cent commemoratives for years and saved them for their nest eggs.  Most of those sheets are postage now.

Its hard to know when but this scenario will play out with a stamp like that above.  Once the crash hits maybe you can use the plastic case as a coaster or something. 


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2009/11/27:  Graded Stamps: Perpetuating the Decline of Stamp Collecting


This past year I've posted a couple of satirical criticims of stamp grading.  This post will be more direct.

As you may know the hobby of stamp collecting has been hemorrhaging collectors for years.  The membership roll of the American Philatelic Society has been in long term decline.  There are fewer dealers now than 50 years ago.  Kids have many other very compelling distractions -- like the computer and internet connection that I am using.  Now there is another threat to the hobby: stamp grading.

I've been watching the phenomenon for years.  In one sense I don't get it.  Take a common stamp, say a US C19 like Tom Vaillancourt of Croton Stamps wrote about in a post this past fall.  $4.00 catalague value, sells at auction for more than $500.  He says this is sane.  Sane?  +$500 for an +XF stamp that catalogs at VF for $4.00?  For me, that kind of price differential defines insane.  I do get this phenomenon in the get-rich-quick sense, though.  If you can con somebody to pay such a premium, why not?  Its a P.T. Barnum world.

I guarantee that if I look hard enough I can find a C19 of similar quality to the stamp that Vaillancourt referred to above.  Without a graded certificate, the stamp would be worth some fair multiple of the catalog price of $4.00, even if it is identical to the graded stamp.  The price has nothing to do with the stamp or its quality in the case of the graded stamp.  The purchaser of the graded stamp is paying for the certificate, which is created by a panel or some individual expert.  Why should philatelists care and pay for a certificate?  Don't we care about stamps? 

For the most part, I would guess that true philatelists don't care for the certificates, though  I suppose some are culling their collections to see if they can make a big haul by getting their superb stamps graded and putting them up for sale to speculators that believe full-out in the greater-fool-theory. 

I am not an expert in this type of commoditization process, but here is how I figure this charade could play out if taken to its logical conclusion:

1. Phase 1: Free market demand vs. limited supply: The situation we have now. Supply controlled by graders. Not by availability of stamps of gradable quality. E.G., 1000 total Scott US C1 stamps could be 98J, but if only two have been graded, that is the supply. In this situation, price is determined by what people will pay due to the condition of limited supply. Supply is determined artificially by stamps seen and certified, not by those that would otherwise be graded similarly.

2. Phase 2: Manipulation of supply. The coming and inevitable phase. More modern stamps cannot tolerate endless grading by grading agencies, whatever the fees generated by these firms. 10,000 98Js of C1 would overpopulate the graded market for this stamp and ruin the business. As the market approaches these situations on more common stamps, the grading agencies will have to control and regulate supply by actively managing the numbers they grade against projected demand.

3. Phase 3: Consolidation of graded stamp market. If and when supply becomes controlled, meaning all stamps of a gradable type have been graded, or graders collude to control the release of graded stamps, the market population is finally known. At this point prices can be set based on expected demand given fixed or controlled availability of a given grade. This is how DeBeers attempts and fairly succeeds to control the diamond market. All diamonds are graded, assigned a classification, and released onto the market varying with demand to maintain price equilibrium.  If diamonds of every quality were released onto the market the value  of a 1.5 carat white VS1 would fall like a stone.  Not something DeBeers, jewelers, or wives and husbands everywhere would want to see.  Yikes!  The loss of the cartel would mean the destruction of the institution of marriage?  See how savvy businessmen perpetuate their business models?  Build'em on sand but make sure you jack up the house and pump in concrete once your done.

So much for the great conspiracy.   There is more.

There is the reliability of the stamp grading services.  The key to any accurate survey, which this business actually conducts (some services even use sampling terminology like "population") is an accurate and reliable measurement of each variable in the survey.  In this case, every service should grade the same stamp the same way, everytime, regardless of changes in the expert or time of assessment.  But the example of coin grading points to a future of unreliabilty.

In the magazine Coin World in May 26 2003, the editors announced they had investigators conducting a year-long study of several grading organizations.   In their investigation, Coin World used the same coins to send to these grading organization.  The magazines investigators found that none of the grading services agreed on the grade of any given coin, "and in some cases the difference in grading was as much as seven points off".
So we will likely have a future of wildly different grading practices and expert judgments. 

And there is counterfeiting. Yikes. We used to have to worry about counterfeit stamps, or counterfeit cancels, counterfeit overprints or counterfeit covers. Now we get to add counterfeit grading certificates. A history of coin grading is instructive here as well:

At the 2004 Long Beach Coin Show, American Numismatic Association members identified counterfeit "slabs" or the holders of graded coins.  These slabs were produced by the Numismatic Guaranty Corporation.  The next year and in subsequent years similar counterfeit slabs were found on eBay.  By 2008 the Numismatic Guaranty Corporation took action and published the following statement:

"NGC has identified and confirmed that (counterfeit replicas) of its holder has been produced.......The holder has been seen housing counterfeit dollar or foreign crown size coins. While the enclosed coins are also counterfeit, the label information matches the coin type enclosed. The label information is copied from actual NGC certification labels, and the certification information therefore will match the NGC database. Most frequently, Trade Dollars and Bust Dollars are found, although Flowing Hair Dollars and foreign coins have also been seen. A range of grades is also represented."

If the difference between a VF C19 and a highly graded C19 is more than $500, you can be sure the counterfeiting is yet to come. 

One measure of how far the rot is spreading would be to count mentions of stamp grading or graded stamps for sale in advertisements in US Scott Specialized Stamp Catalogs.  The catalog is annual and the gold standard for US collecting.  At hand I have the 2009 and 2010 catalogs.  Here are my counts:

2010

Page 19  Full Page  PSAG, Philatelic Stamp Authentication and Grading
Page 21  Third Page  Steve Malack
Pages 36, 37  Full Pages  Casper Coin
Page 43  Full Page  Gary Posner
Page 49  Half Page  Century Stamps
Page 79  Full Page  Heritage Stamp Auctions
Page 85  Third Page  Casper Coin
Page 303 Third Page  Casper Coin
Page 315 Third Page  Casper Coin

2010 Totals:  6 Advertisers
                     5.83 Pages

2009

Page 7  Full Page Matthew Bennett
Page 25  Third Page Steve Malack
Page 37  Full Page  Jay Parrino
Page 39  Ninth Page Steve Malack
Page 41  Full Page  Momen Stamps
Page 49  Full Page  Rupp Brothers
Page 51  Half Page  Century Stamps
Page 57  Full Page  Professional Stamp Experts
Page 71  Ninth Page Steve Malack

2009 Totals:  7 Advertisers
                     6 Pages

Curious this.  Two data points do little to define a trend.  But total pages and the number of dealers or grading services mentioning graded stamps declined slightly from 2009 to 2010.  Maybe there is hope.  Also, only Steve Malack Stamps and Century Stamps were repeat "graded stamp" advertisers.  Not sure what that means.

To those who want to speculate in stamp "slabs", or even in graded stamps without a slab, caveat emptor.  To the philatelists reading this message, sell your XF stamps for a fortune to the highest bidding speculator.  And use that money to invest in a world of fabulous sub 95 stamps.  You'll have better access to more material than ever before.

11/29/09 BTW:  Check out page 37 in the 2010 US Scott Specialized Catalogue. It is the second page of a Michael Casper ad. Here is what you see: a dark page, a man with long hair at a desk, inspecting a stamp in a plastic case with piles of graded and certificated stamp material around him and a box of "slabs". In the upper left corner is this statement: "Collecting stamps is a hobby for some, a serious hobby for others, and for a few people its just plain serious". The implication being that those engaged in the collecting of stamps in slabs is somehow serious. Seems like a carpet bagger from the coin world showed up and is trying to become a market maker in graded stamps, in part by buying a bunch of ad space in the 2010 catalog. 

Michael Casper's own mini-bio is here:  Caspercoin.

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