If it wasn't clear before, it is now: Goldman Sachs (NYSE: GS) has no intention of giving up on principal investments. And why should it? Before the mortgage-bubble, the firm had raised the use of such investments to pad earnings to an art form. Rarely did a quarterly earnings release go by without at least one principal investment paying off handsomely.

But the controversy in the Dodd-Frank era is whether the Volcker Rule proscribes these sorts of investments. We've discussed this quite a bit recently, most notably in the context of Goldman's recent deal to buy a large stake in Management Dynamics.

Providing ammo for those who believe Goldman aims to continue with this activity, esteemed bank analyst Guy Moszkowski has published a note to clients after meeting with four Goldman executives in Hong Kong, reports Bloomberg. His conclusion: "Goldman Sachs doesn't think U.S. legislation passed last year that bans proprietary trading and limits holdings in hedge funds and private-equity funds precludes buying stakes in companies and other assets."

Moszkowski added: "The market interpretation of Volcker rules is that this will be off-limits ahead, but GS believes that many such investments will remain permissible, and will be closing on a ‘meaningful' one in China shortly."

This is most likely good news for Goldman shareholders. "If the firm can indeed continue to take on these principal investments, we believe that ROE can well exceed what's currently priced into the shares," Moszkowski wrote.

One issueis how regulators will respond if they think the bank is skirting the spirit of the Volcker Rule. The bank seems to be betting that the SEC is not well-positioned to take on this issue right now.

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