Ten-foot-high letters that spell out Karl Marx in script across the face of the boldly modern theater here make the place look almost like Bloomingdale's.

At night the big letters light up white, bordered in black, and down below 5,000 ticket-holders wander about like night shoppers at the height of the Christmas rush.

Standing in the midst of them is Billy Joel, a household name and face in the United States, a winner of two Grammy awards this year, a gold-record performer who has also sold out concert halls around the world.

But nobody knows him here, even though taxi radios all over town deafeningly broadcast a Spanish version of his "Just the Way You Are."

When the doors of the Karl Marx theater finally open, Joel and his band and about 125 other Americans walk into the vast concert hall. It has several loges and balconies, with the whole interior finished in light wood and sound-absorbing gray metal manufactured in the Soviet Union. The huge banks of speakers and lighting equipment, flown in from Dallas, Tex., look out of place on the Karl Marx stage.

And then it happens: Joel is spied by Frank Alveres, a 21-year-old medical student, a native of Havana who happens to be an absolute Billy Joel fanatic. Alveres explains that he stays up late into the morning, monitoring Florida radio stations, taping every smidgen of Joel material he can glean from the airwaves. He has had an uncle send him tapes and records of Joel music from Canada. He invites friends over to his house to listen to these sacred artifacts. And now Alveres is unbuttoning his denim jacket -- to reveal a Billy Joel T-shirt that took him months to track down.

"What would you like us to play?" Joel asks the student, and then is amazed as Alveres rattles off a comprehensive list of titles. Joel puts his arm around the Cuban and says, "This is your show, baby."

"Then," says Alveres, "you must do 'Rosalinda's Eyes.'"

You can see Joel thinking about that song of his, under the roof that proclaims "Workers of the World Unite."

Crazy Latin Dancing solo down in Herald Square

Oh Havana I've been searching for you everywhere.

The auditorium is filling up. Fifty tie-dyed, sun-bleached Americans from Key West amble in, looking like refugees from Woodstock, the men in bare feet or flip-flops, the women with flowers in their hair. They say they had cabled Havana and received visas. They were sold tickets including bus fare from the Barlo Benta Marina where they have docked their sailboats 12 miles west of town.

This is the most direct information anyone got on the three-day U.S./Cuba Music Festival here, the first since the revolution.

The Cultural Ministry claims ignorance on how the 5,000 tickets were distributed for each of the three concerts. Some patrons say they were given tickets. Others say they bought them, the price ranging from $5 to $8. Alveres says he was given his for being a good medical student. Another Cuban says tickets were distributed to good members of the Communist Party. Still another says that you had to know the right people to call.

"I was told on Friday afternoon that the tickets hadn't been sold at the box office," says Bruce Lundvall, president of CBS Records division, "and I hit the roof." He is peering around the auditorium, noting the large numbers of older couples who have been holding their ears during the opening set by Weather Report, a very loud rock-influenced jazz group. The one element of their show greeted ecstatically by the audience is an outerspace version of a song called "Is Anybody There," which starts with a rocket countdown and climaxes with the stage full of fog and glaring light effects. Perhaps, observers speculated, Ted Nugent, Alice Cooper, Blue Oyster Cult would have been equally appreciated.

In fact, only artists from CBS Records are here. On Friday, Weather Report gave a loud and flashy performance of jazz rock that excited the audience, followed by Yaguarimu, a Latin band with lounge-act overtones, and the orchestra Aragon, a delightful blend of percussion, flute, piano, three violins and a cello. The Aragon orchestra has been popular here for over 40 years, and last year visited the U.S. for the first time since the revolution. While the group was appearing at Avery Fisher Hall, a bomb was detonated in the building.

By midnight Friday, when the Fania All-Stars appeared, many in th audience began to leave, even though several members of the group are natives returning to Cuba for the first time in two decades.

Strategic Enthusiasm

Saturday's concert began at 8:30, with several styles of American jazz, from big-band numbers to the frenetic guitar of John McLaughlin. Dexter Gordon's fluid sax-playing elicited the most enthusiastic response from the audience. A percussion group, Los Papines Cuba, with 35 musicians, was followed by Stephen Stills, whose song was written in Spanish for the occasion. This again brought the crowd to its feet -- prompted largely by a row of Cubans strategically near the front of the theater who said they had been asked by the Cultural Ministry to respond warmly to the American music. At one o'clock the jazz goup Irakere roused some members of the audience who had managed to slumber during Stills' set.

The genesis of the music festival here was an unexpected stop in Havana two years ago by a ship carrying a number of American jazz musicians, who have an impromptu concert with their Cuban colleagues. A year later, Lundvall began to visit Cuba, and eventually signed Irakere, a local group, to his label. After a year of negotiating, the festival was arranged, although neither the U.S. nor the Cuban government has sanctioned it. In fact, the royalties for the Cuban group have to be placed in a stateside escrow account because of restrictions that still exist on trading with Cuba.

"We started working on this by asking Cuban cultural people who they would want to have visit," said Lundvall.

"They were certainly interested in some sort of all-star jazz ensemble with people like Stan Getz and Dexter Gordon. Then Stephen Stills got interested because he is going to do a tour of the U.S. with Irakere, and he grew up in Latin countries and speaks Spanish. Billy Joel was a natural. Kris Kristofferson and Rita Coolidge were almost a fluke. We were talking with them about a live album, and Earth, Wind and Fire were all set to come, but they went to Europe instead, so Kris and Rita came. Santana wanted to come, but for some political reason the Cubans were not interested.

"Of course, this is costing us a lot of money -- several hundred thousand dollars. And it is all Columbia artists. But I feel, why not be greedy and do something adventurous. We'll get several albums out of this, we're videotaping the whole thing for a possible TV special, and portions of the concerts will be broadcast on over 250 U.S. radio stations on April 8. I imagine there'll be some opposition from Cuban nationalist groups back home. We had our plane guarded for several days before we came down here. But on the whole, I think it gives the company a very forward-looking image."

It seems odd that very few people here in Havana know about the festival. There is no mention of it in the press or on television and radio.

"This is being tolerated," says a young man on the street, "only because of all the dollars the festival will bring into the country. No one has been told of the concerts, and only those with connections can get tickets."

"Even if people did know of the festival," says his friend, another 18-year-old, "there should not be so much interest. We do not know of your musicians by name."

Indeed, when Joel sat at a piano Saturday in a downtown hotel and began to play a few notes, the maitre d' walked over and sternly waved his hands for him to stop.

Two minutes later another fellow came up and announced, in Italian, that this must be Billy Joel, the American musician, here for the concert. Identification established, he then added: "Listen -- I can exchange pesos for dollars at a much better rate than at the hotel. . . "

"Everybody has a scam, it's human nature," said Joel, wandering off in search of a record shop.

Karl Marx, Backstage

Backstage at the Karl Marx Theater Saturday night, Cuban workers are mingling with bearded and pony-tailed men from Dallas who are taking care of the stage arrangements.

"No, no," a Cuban says to an American. "Don't call me senor. It is companero, comrade. We are all workers." Two hours later the Cuban has bought a watch from the American, and says that he would be in "much trouble" if the government were to find out.

Only this ideological contrast makes the scene any different from one at any other musical event excepting, of course, the language barrier. Boxes are marked, "este lado arriba, equipo fragile electronico."

There is little real contact between American and Cuban musicians, except during a brief jam at the close of Saturday nights concert. At 2:30 a.m. a group of American jazz musicians is huddled around a cassette recorder, howling and talking back at a tape of Richard Pryor's "Wanted" album. Rock 'n' rollers are huddled around another table, making puns:

"You cheat on your wife and that's in-fidel-ity. You buy a stereo and you get hi-fidel-ity."

And the only one making real inroads is Frank Alveres, who by now has become the festival's mascot, busy hurrying around to collect autographs.

People are making pictures of him, and he's got easy access to all the musicians, and he's being taped for American television. . . .

Alveres, however, confesses to a horrible nightmare: He's afraid he's going to get put in jail for becoming too friendly with the North American imperialists.