Goldman Sachs Group (NYSE: GS) reported a $2.12 billion loss for the fourth quarter. So why is its stock up in pre-market? It's the usual reason -- investors expected it to lose even more money. But the real question for investors is whether Goldman will be able to earn a profit in 2009 or 2010. After all, beyond helping to restructure bankrupt companies there does not appear to be an obvious source of revenue growth for Goldman.

Goldman lost $2.12 billion in the fourth quarter due in part to write-downs of assets that it had overstated on its books. But investors expected a $2.5 billion loss so the stock was up 3.8% in pre-market and opened nearly 5% higher. One strange thing I have noticed in recent quarters is that banks report something called "negative net revenues" -- the result from enormous asset write-downs that offset any trading revenues -- which in Goldman's case totaled $1.58 billion.

Goldman's revenues across the board were way down for the quarter. Investment Banking revenues were down 48% to $1.03 billion; Financial Advisory revenues tumbled 54% to $574 million; Underwriting business fell 37% to $460 million; and Net revenues in Trading and Principal Investments had negative net revenues of $4.36 billion. That's not all but you get the idea -- business is bad.

It looks like SEC Chairman Chris Cox still has his job -- this despite John McCain's call to fire Cox. And what has Cox done for us lately? He's banned short selling on 799 financial stocks for the next 10 days, according to the Wall Street Journal [subscription required]. The SEC's temporary ban on short selling won't help deal with the underlying problems causing this 100 Year Crash -- but it won't make them any worse.

Short selling is one way to bet against the decline in a stock's share price. A short seller borrows shares from a broker and sells them at that market price. SEC rules give the short seller three days to obtain custody of those shares. The short seller profits by buying back the shares at a lower market price to repay that stock loan. So-called "naked shorting" -- when the short seller never obtains custody of the shares -- is considered abusive. By banning short selling, the SEC is trying to interrupt a negative feedback loop about which I posted yesterday.

This loop helped shorts profit from a decline in investment bank shares. How so? All the bad news has been driving down their shares so much that ratings agencies downgraded the investment banks' debt. Since that debt was insured through the $62 trillion Credit Default Swap (CDS) market, the downgrade threat boosted CDS premiums requiring the investment bank to post collateral in the billions. This put even more pressure on the investment bank to raise capital, driving down its shares even more.