GRADING - THE CAVEATS

There is a tempation to believe that a stamp that is graded at, say 95 points, is worth more than a stamp worth 90 points. And for the most part, this would be right, however a total belief in this, will lead to some costly mistakes.

This is because grading is primarily, not solely, but primarily, based on centering and condition of the stamp. It does not take into account the appearance of the stamp. For instance a stamp that is heavily cancelled will not have any points penalty applied to its grading. Or to take a mint stamp, a stamp that looks like it was printed yesterday, has fine detail and is, as they say in the trade 'Post Office fresh' will not get any additional points over a similair stamp which is dull in appearance, which suffered from a worn plate in the printing process and looks like it was printed by Fred Flintstone.

To give you an example of this (and there are thousands upon thousands of examples), look at these
three stamps from a 2008 Siegal sale which were all graded 90 points;

Despite all being graded 90 the first stamp sold for $1,300, the second stamp sold for $275 and the third stamp sold for $300. Looking at the three stamps (or reading Seigals description), it is obvious why the first stamp attracted the higher price, looking solely at the grading you would never know which one to buy.

EBAY Buyers Beware
Folks have taken to buying graded stamps off ebay. When you look at the ebay prices listed on this site, you can see that graded stamps sell at a substantial discount over auction house prices. The reason is that when buying in an auction you can see the stamp, and companies like Bennett, Shreves and Siegal wish to preserve their integrity so attempt to give an accurate pictorial representation. The ebay seller has a scanner, 99.9% of the time it has not been color calibrated. Or the ebay seller has a camera and Photoshop has not been calibrated. In either case, the last stamp pictured above could very well look like the first stamp above, and the buyer ends up buying it solely because it has a 90 point grading. Not till he tries to sell it will he find that he has made a $1,000 mistake. So if you must buy a graded stamp on ebay, please ensure the sellers return policy is watertight and do not be afraid of returning the stamp if the appearance is less than shown on the listing. Even very slightly less than shown, the difference could be in the $100's or thousands of dollars. Also be cautious of graded stamps that have been slabbed, they never photo well and hide their overall appearance.

Graded stamps - don't bank on the price going up
The fad for grading stamps only got going in the last couple of years, a search of ebay two years ago reveals just two graded stamps for sale in April. In April 2008 there are over 200 on offer. The same kind of ratio can be applied to auction houses, but stretch this time period to three years, not two. When collectors see what a well centered stamp goes for they have their own well centered stamps graded, adding to the ever growing pool of graded stamps. Suddenly that 'only one graded at this lofty grade", becomes "one of eight graded at this lofty grade". And the value down the road goes down, and down and down.

Of course some sellers will show you graphs with glowing pictures of how the PSE value of a particular stamp has gone up and up. Surely you cannot lose? Or can you? To prove a point I picked one stamp completely at random, and two years. The stamp was #233 the 4c Columbian, a pretty common stamp. The years 2006 and 2008. Without pointing fingers at the auction house (they are not the villian in this), lets look at how the description of a 95 point 4c Columbian was told in these two years.

2006 Description - 4c Columbian (233). Mint N.H., radiant color, perfectly centered with wide and balanced margins EXTREMELY FINE GEM. A SUPERB MINT NEVER-HINGED EXAMPLE OF THE 4-CENT COLUMBIAN ISSUE, WHICH HAS BEEN GRADED XF-SUPERB 95 BY P.S.E. With 2004 P.F. and 2005 P.S.E. certificates (XF-Superb 95, SMQ $1,800.00)

2008 Description - 4c Columbian (233). Mint N.H., brilliant color on bright paper, gorgeous centering with wide margins EXTREMELY FINE GEM. A SUPERB MINT NEVER-HINGED EXAMPLE OF THE 4-CENT COLUMBIAN ISSUE, WHICH HAS BEEN GRADED XF-SUPERB 95 BY P.S.E. With 2007 P.S.E. certificate (XF-Superb 95, SMQ $2,200.00)

The SMQ is the value that PSE attributes to the stamp. In 2006 the stamp sold for $2,000, and in 2008 it sold for $1,800. On top of this the 2008 stamp is the better looking stamp. Enough said? Almost. The point is that many, if not most, PSE graded stamps do in fact increase in price year after year. But it is better to look at the auction results (and the images associated with those auction results) before writing that check for $2,000.

PSE are not the villian either, they are very specific about their grading criteria, and one should buy graded stamps with their criteria in mind. The villian is a pervasive belief, which I encounter at stamp shows and other stamping events, that the grade is the be all and end all of its value. Or that the value that PSE attributes to a stamp (or its increase in value), is correct. PSE do not have a crystal ball when it comes to future market prices, it is their best guess and is far more accurate than Scotts or for that matter this site. However when it comes down to it, do not put your complete trust in PSE, the auction house or Scotts, instead use a combination of sources that you trust and add a large dose of common sense.

Oh and..... happy stamping.