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Second Order Effects of CGC Grading

Excitement continues to grow in the collectibles market as word spreads about the third party authentication and grading of posters by CGC.

Since this is at least the SIXTH collectible category to receive third party grading (coins, stamps, baseball cards, comics and paper money), many collectors expect the market for these posters to react in similar and obvious ways experienced by these other collectibles. Specifically, these “First Order” effects include 1) increased media attention, 2) this increased media attention results in a huge increase in NEW collectors that can now collect with confidence. 3) Since this rise in demand is chasing the same small supply, values go up. 4) And since dealers can easily quote buy prices for CGC graded posters sight unseen, liquidity is increased. 5) Also, since third party grading is inherently about distinguishing differences in quality, there is a huge focus on quality.

Not to so obvious, are many second order effects of third party grading, one of which we will discuss now. First, CGC grading will make it much easier to track values and price performance of concert posters. Because there is a standardized grading scale, posters can be far more easily compared to each other and properly valued. Say you have two of the same poster, example A and example B. Example sells for $1000 at auction and a dealer is asking $3000 for the same poster via private sale because it is the best example he has ever handled. Is this a good deal? Without third party grading, it could be hard to say. If example B is in reality much higher quality, it could be a steal. But if it’s the same as example A, it’s hard to say. If BOTH posters were graded by CGC, it would be much easier to know.

Let’s take another valuation example. Lets say that a poster you’ve been hoping to buy finally comes available after 2 years of searching. The dealer wants $2500 and the poster is CGC graded. Your research tells you that this same poster that has traded in the past for $900, 1100, $1500 and $4000. Is it a good deal? It’s hard to say because it’s impossible to know the quality of the other previous sales. If all the posters were graded, the answer would be easy.

One last example will involve past price performance. Lets say you want to determine if a poster has risen in value over the past 5 years. As of now, past price realized are somewhat meaningless unless the same exact example of the same exact poster is sold multiple times. Otherwise, you are not comparing “apples with apples”. Now that CGC is grading posters, you can look at different examples of the same poster in the same grade and compare their price performance over time. So if 3 different examples of the same poster have all been graded 9.0 by CGC, you easily track these data points and see if a clear trend emerges.

The bottom line is that third party grading brings order to collectibles marketplaces that previously operated like the “Wild West”. Make no mistake about it, just a very few posters have been CGC graded. By no means should you pass over the 99.99% of those that have not yet been graded. Just make sure that you are buying from an honest dealer that stands behind their product with a strong guarantee, in writing.

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