It is simply hard to tear your eyes away from the slow-motion train wreck that is Europe. Historians will be writing about this moment in time for centuries, and with an ever-present media we see it unfold before our eyes. And yes, we need to tear our gaze away from Europe and look around at what is happening in the rest of the world. There is about to be an eerily near-simultaneous ending to the quantitative easing by the four major central banks while global growth is slowing down. And so, while the future of Europe is up for grabs, the true danger to global markets and growth may be elsewhere. But, let’s do start with the seemingly obligatory tour of Europe.

This week I am in Ireland and going from meeting to meeting with a wide variety of people. And this week's letter is a wide-ranging interview with me, conducted by that doyen of financial-world interviews, Kate Welling. She really is one of the best, and she has graciously given me permission to share the interview with you this week, while I am researching next week's letter on Ireland and Europe. I hope you enjoy reading it half as much as I did recording it.

(Sorry for the letter being late. There was a major technical difficulty. – The Editing Team)

But first, in the interest of full disclosure, I want to briefly note to my readers that I have joined the board of Galectin Therapeutics (Ticker: GALT), a small biotech company with unique potential technologies. I get asked from time to time to join a biotech corporate board, but have so far not done so, and the exception is now GALT.

Basically (to make a long story short), GALT has a deep repository of research performed in the USSR prior to the fall of the Iron Curtain, on carbohydrates. Russian and Eastern European scientists had traveled the world looking for new carbohydrates in plants, etc., and the research spanned many decades. When Russian science lost much of its funding, some of those famous scientists came to the US and brought this research, which was then quite new. In the West, we had concentrated on using proteins as drugs, ignoring by and large their lowly sugary brethren.

In an agonizingly slow process, funding found its way to this research, and some very interesting things were discovered about a particular type of carbohydrate that binds to and blocks a protein called galectin, which appears to cause cirrhosis. It seems to be found in the presence of cancer cells, and according to peer-reviewed research may be the cause of cirrhosis of all types, but specifically of the liver. Mouse and other studies suggest the blocking carbohydrate has the potential to be a cure for cirrhosis, and GALT will be in human trials next year with the very prestigious liver research group at Ludwig Institute in Brussels and plans to be in clinical trials next year for liver fibrosis. One of GALT's molecules also appears to dramatically reduce the side effects of chemotherapy for certain types of cancer treatments. (Phase-two trials indicated a unique combination of increasing median patient survival while reducing the number of severe adverse events by approximately 50%). GALT has an application pending with the government of Colombia, which suggests the possibility of use in Latin America soon).

These are wonderful things, of course, but not why I joined the board. In economics, Bastiat used to talk about "the things you can see and the things you don't see." What I "see" in GALT is what is not yet seen, and that is the treasure trove of data on carbohydrates, for which uses are so far only vague speculation. I see the potential for a lot of very interesting research, which will be very costly, but could have real impact, as their current cirrhosis drug candidates have. I should mention that the liver research is highly speculative, as there are no human trials, only mice, rats and human liver-cell culture studies. These are encouraging, to be sure; but as my doctor, Mike Roizen, constantly reminds me, to help temper my enthusiasm, "John, orange juice works in mice!"

Investing in small biotechs with "potential" is somewhat akin to investing in junior and exploratory gold mining stocks. If everything works out, the returns can be exhilarating, but the majority of them will go to zero, so you need to do a LOT of homework and have a diversified basket of them. I do that with biotechs. I love each one of my "investments," but I fully recognize that for a whole host of reasons they could go to zero. What can be a wonderful technology may not work in humans, or it can work but another company comes along and does it better and cheaper, or (more likely) they run out of money or have management problems.

GALT is a perfect example of what I look for. They have wonderful upside if the technology proves out, but will be a big disappointment if it does not. Clearly, I think there is something there, if I am willing to join the board. I also know that some of you will be tempted to "ride along." Let me say, do not, unless you go to their website, listen to their CEO, Peter Traber, explain the technology and company, read the independent research, and look at the board that chairman Jim Czirr has rounded up. GALT has had "issues" in the past, as my kids would say, and it has taken Jim some time, since he organized a take-over of the board, to get the ship headed in the direction it needed to go; but he is fanatical (almost maniacal) about it, which is of course what you must have. Dr. Traber, formerly in charge of global drug development for Glaxo, is a force in himself and relatively new as the CEO. I am very impressed with him. I really like the management team and the plans going forward. No guarantees of course that the good plans will work out the way we hope.

And if you do the research for yourself and like what you see, then be patient. Do not chase the stock price. Pat Cox of Breakthrough Technology Alert introduced me to the company and I bought a few shares, a long time ago. I intend to buy more over the next year; but as a director, I will allocate an annual amount and buy them on a regular, prearranged basis regardless of share price, and will not start to do so for some reasonable time after this announcement. So, I have a mixed bias. As a director I want to see the company shares do well, but I hope they don't get too high, for a while at least. (It's much like my monthly gold purchases: I am glad to see gold is down, as I get more of it when I buy!)

Don't buy if your time horizon is measured in less than years. If you feel the need to look at charts and current prices, then I suggest you pass. I have no idea what the stock will do in the short term, nor a timetable for reportable results. You can see the website at www.galectintherapeutics.com. You can request a copy of the independent research by emailing your request to squeglia@galectintherapeutics.com or calling the company at 617-559-0033.

As will be clear below, I had finished an earlier version of this week’s e-letter, but the events of the last few minutes require a few paragraphs. As I write at the end of the letter, Bloomberg kept their satellite truck here in Maine, as they had got advance warning of the downgrade by S&P of US debt and wanted to interview a number of the economists here, including your humble analyst. I can’t rewrite the letter at this late hour, but will send you additional comments on Monday. And you can go to www.bloomberg.com and see everyone’s remarks, including mine. It will be there somewhere, they promise me.

And now, a few questions and observations are in order.

First, as I walked to the area where the Bloomberg was shooting to go on, Jim Bianco and John Silvia told me that S&P had downgraded the Fed. I laughed and said, “If you guys want to make me look like a fool on TV, you have to at least make up a credible lie.” They kept insisting it was true. I finally asked Mike McKee of Bloomberg and Barry Ritholtz, who was on-air, if it was true. They claimed it was, too. I was still wondering if they were setting me up, but even Roubini (who wouldn’t do that to me) said it was true.

So, if the Fed, which doesn’t issue credit and can print money, can be downgraded because it holds AA+ debt, then why and how in hell can the ECB, which holds hundreds of billions of euros of the junk debt of Greece and Ireland and insolvent banks not be downgraded on Monday? And the Bank of Japan? REALLY? What are these guys smoking? Do we now downgrade GNMA? Of course. And the FDIC? What the hell will repos do on market open? The NY Fed says it won’t affect anything. Don’t ask me, I just work here. And how can you rate France AAA? And still give AA or more to Italy when the market is saying they are getting close to junk?

Side bet for Monday. This could make me look like an idiot, but I think treasury yields fall as the risk-off trade increases. Can this come at a worse time for a nervous market? By the way, maybe you want to go long Kimberly Clark, as they make Depends (the adult diapers here in the US, for my non-US readers), because sales are going to skyrocket all across the financial markets.

Can we say Endgame, gentle reader? Madness. And now on to the regular letter. More to follow Monday.

__________

This week I write from Maine, where, when we landed in the float plane at Leen’s Lodge in Grand Lake Stream on Thursday, we learned that the market had closed down 512 points. I was in the plane with Nouriel Roubini and Jim Bianco (plus a Fed official to be named later), where for whatever reason we could get reception on and off (no phone works at the lodge). We were just watching the market fall. It is fun to sit next to Roubini as a market crashes. He knows ALL the market crash jokes.

So, as is my normal routine for this fishing trip to Maine, I take the week off and invite a guest columnist in. This year it is Keith Fitz-Gerald, whom I have heard speak twice and have started reading. He has lived all over the world and spends a lot of the year in Japan, and is a true expert on emerging markets. I am a fan of investing in emerging markets (as I agree they are the future) but do not consider myself anywhere close to Keith’s level of expertise. So this week we take a look at the case for emerging markets.

If you are interested in subscribing to Keith’s letter and learning more about emerging markets, you can go to https://purchases.moneymappress.com/MMRKFGSHORT4950to79/LMMRM800/. It’s fairly inexpensive and my readers get half off. Now, let’s jump in, and I will end with some closing comments.

I am on yet another plane and writing, and I’ll finish this letter in Phoenix. As I start, I am not sure of a theme for this week’s letter, so (with a tip of the hat to my friend Burton Malkiel, who I will see at Rob Arnott’s conference in a few months), today we do a Random Walk Around the Frontlines, surveying what’s going on in the world. We’ll start with the Fed and interest rates, look at inflation, and see how far we get. And I might get a little controversial, but long-time readers know that is not all that unusual.

But first, I want you to mark your calendars for April 28-30, when I will host, along with my partners at Altegris Investments, what I think will be the single best investment conference of the year. It will be the 8^th annual Strategic Investment Conference in La Jolla. Let me give you the Killer’s Row line-up of speakers, in alphabetical order. Martin Barnes (Bank Credit Analyst), Marc Faber, Niall Ferguson (author and Harvard Professor), George Friedman of Stratfor, Louis-Vincent Gave (of GaveKal), Neil Howe (the Fourth Turning), Paul McCulley (if he ever surfaces from his fishing vacation), David Rosenberg, Dr. Gary Shilling, Jon Sundt (of Altegris), and of course, your humble analyst. I mean, really. Most conferences have one or two top-tier headliners. We have nothing but the best. These guys are all great speakers, but getting them on panels together? Way cool. Plus some of the best hedge fund managers (personal opinion) show up to give you their thoughts. And maybe a surprise last-minute guest or two. If this conference lineup were a baseball team, they would sweep the World Series. Oh, and the best part? Your fellow conference attendees. The interaction among them is what truly makes this conference the best.

We (well actually, Altegris) will soon start sending out invitations, but you can register today at https://hedge-fund-conference.com/2011/invitation.aspx?ref=mauldin. Sadly, the conference is limited to accredited investors with a net worth of more than $2 million, as there are funds presenting that require that minimum (and some even more). Those are the rules we have to live with, whether I like them nor not (I don’t, as long-time readers know). But we follow them religiously.

Every year the conference sells out. Every year some of you wait to the last minute, thinking we can “always take one more.” We can’t. There is a limit to the space. If you have attended in the past, call your Altegris representative and make sure you get on the list. Do not procrastinate.

Now more than ever you need to consider the place for alternative investing in your portfolio. I work with partners around the world for both accredited and non-accredited investors. If you would like to know more, then go to www.johnmauldin.com and click on The Mauldin Circle, register there, and someone will call you. Seriously, the teams at Altegris (for US accredited investors), CMG (for those with net worth less than $2 million in the US), ARP (Europe), and others have some very innovative and interesting funds and managers on their platforms that really deserve a look. Even if you can’t make the conference, your portfolio will thank you for finding some alternative investments that make sense in these times. Now, to the letter.