Volume. Everyone complains about it, but nobody does anything about it.
I have noted that the low volume we have been seeing this summer did not materialize in June. Volume has been dropping since 2008. Total share volume at the NYSE (all trading in all NYSE stocks) went steadily up from the 1980s all the way to 2005. (Read more: Stocks Rise After Bernanke, ECB Action Report)
It started increasing dramatically in 2006, not coincidentally one of the years when high-frequency trading exploded.
But since 2008, the year of the financial panic, it's been declining.
But there is another way to measure volume besides the number of shares traded. It's by dollar volume: the total dollar value of the shares traded, rather than just the number of shares traded.
Why is dollar volume important? Dollar volume reflects the horsepower that is behind the market. It reflects the actual amount of dollars that the public is trading, rather than just the share count. For example, if there are more $100 stocks now than there were several years ago, there would be lower share volume if the public was investing an equal dollar amount, but the dollar volume would remain the same.
So, what do we see? Dollar volume has remained fairly steady. According to data provided to me by Tom McClellan, dollar volume has been relatively steady since 2009. There have been times, of course, like August 2011 during the European financial crisis, when both dollar volume and share volume increased dramatically. And dollar volume has decreased this summer, along with share volume. (Read more: The CNBC Stock Blog)
But overall, the dollar volume is still close to 2009 levels. It was about $90 billion dollars a day at the start of 2009 (this is a 21 day average), and it's about $90 billion a day today. The average over the past 3.5 years has been $110 billion a day. (Read more: Traders Eye 1400 on S&P 500)
By contrast, NYSE share volume, which was about 4.5 billion at the start of 2009 (again a 21-day average), has slowly sloped down for the past several years, and is now close to 3.5 billion a day.
Why has the dollar volume remained roughly the same? One answer is that the prices of stocks have gone up. According to Tom McClellan, the average share price for a stock on the NYSE was $52.42 in January, 2009. Today the average share price is $71.16, an increase of about 40 percent.
So why do we keep talking about the low SHARE volume? For Wall Street, share volume is more important because the sell side gets paid by SHARE volume, not DOLLAR volume.
By the way, you can imagine why Wall Street would love it if high-priced stocks split. So if you are Apple, and you know that Wall Street guys will get paid more if you split your shares 10 for 1, what incentive does Apple have to split the shares? Of course, there are other issues involved besides just Wall Street commissions, but you get the point.
—By CNBC’s Bob Pisani
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