He's uglier than Ed McMahon with a hangover.

With more wrinkles than the entire town of Palm Beach.

Meet E.F. Hutton. He's 3 years old. A Chinese Shar-Pei by name, cover dog (December 1984 Dog World) and sought-after model (Neiman-Marcus). Because he "throws his type," dog breeder talk for the ability to reproduce himself accurately, his puppies sell for $3,500. Each.

Some people say Shar-Peis are so ugly, they're cute. Others say they're just plain ugly.

"So are the Cabbage Patch dolls, but look what they did," says Kandi Stirling, owner of Joss Kennels, one of the largest Shar-Pei show dog kennels in the country, nestled in the lush green cleavage of the Blue Ridge mountains outside Charlottesville. Stirling predicts that the Chinese Shar-Pei, pronounced shar-pay, "is going to be the most popular dog in the country in the next two years."

Here at the kennel, the dogs are everywhere, about 40 of them, according to Kandi's husband Ray. The six or seven fawn-colored puppies in the kitchen look as if they're wearing turtleneck sweaters. Their skin ripples in deep folds, their tiny toenails tap against the slick linoleum.

E.F. Hutton is on a leash. He drops his massive head on a visitor's thigh and drools. There is something disarmingly sweet about him. Nature's way of saying it can take a joke.

How ugly are these dogs?

"No matter how bad you think you look when you wake up in the morning, you can always look over at your dog and know that you don't look as bad as that," says Stirling.

Shar-Peis -- which had been all but extinct a decade ago and were listed in the 1976 Guinness Book of World Records as the rarest dog -- are suddenly all the rage. They now number more than 6,000 in America. Because of their intelligence, uniqueness and high price tag (between $900 and $5,000), they are the current dog of choice for the affluent, trendy and terminally hip.

Which has dog breeders everywhere seeing dollar signs.

Kandi Stirling says a recent litter of eight pups brought $20,000. But she says she's not in it for the money.

"There is not enough money in it, believe me, to put up with the strange customers you get. They are a different breed than any other. They paid a lot of money for this dog -- they expect you to answer that telephone 24 hours a day, they expect you to be there and hold their hand. They will call me at 2 in the morning because the dog coughed."

Celebrity owners include Burt Reynolds, William Shatner (he named his "Spock"), Yul Brynner, Wayne Newton, Andy Gibb, Joanna Carson, the king of Morocco and a family by the name of Mellon.

"They do attract some of the more affluent people in the country," says Madeline Litz, owner of A-Cappella Kennels in Greenville, N.C. "A person who buys a dog for $3,500 has a little more disposable income than the average person."

"I've had people send their Rolls-Royces and chauffeurs to pick them up," says Linda Schatzberg, who owns World of Wrinkles kennel in Madison, N.J. "They're so ugly. They're so lovable. They're so different. If you like to get attention, you have the right dog."

Neiman-Marcus featured Chinese Shar-Pei puppies in its 1983 Christmas catalogue. The dogs were a bargain -- $2,000 each. The hand-carved, oriental pagoda doghouse was a steal at $2,750. The store got so many queries it had to hire two full-time secretaries to answer the phones. Through a kennel outside Houston, it sold 50 dogs, and customers included a Las Vegas Entertainer, an Unknown Prince and an attorney in South Africa. Names were still being added to a waiting list as late as April. Other breeders bristled at the promotion, and the Houston kennel owner was asked to resign from the board of directors of the Chinese Shar-Pei Club of America.

This past Christmas, Neiman-Marcus went even further. For a mere $13,500, the little woman could wrap herself in a familiar-looking rippled fur coat designed by Fendi and "inspired by the enchantingly wrinkled Shar-Pei dogs." Ironic, since the Chinese used to make coats out of the Shar-Peis they didn't eat.

But all that's in the past. Today the Shar-Pei has assumed the role of celebrity. They're on the talk shows, in Town and Country and Vogue magazines. They're also featured in the current ad campaign for Aramis men's cologne.

"This Christmas the demand for Shar-Peis was unbelievable," says breeder Linda Schatzberg. "They don't even look like a dog. They look like a walrus, or something wearing the wrong size coat. 'A puddle of the uglies' is how I once heard them described."

"There's nothing else in dogdom that looks like it," says Madeline Litz. "Somebody told me they look like a Ruffles potato chip. Actually, they were bred to look like a Chinese warrior."

Ugly?

"Aloof."

Dog breeders are a sensitive lot, high-strung and easily offended. Competition is particularly nasty among Shar-Pei breeders.

"This is a breed where there's a lot of gossip," explains Kandi Stirling. "There are a lot of very flappable people in this breed because they paid a lot of money for these dogs. There are a lot of emotions involved in this breed because of the high prices, the expectations."

Caroline Cobb, public relations executive for Neiman-Marcus, says that part of the catalogue flap was because "among themselves, the breeders haven't agreed what the dog should actually look like."

Should it have a lavender tongue or a blue-black tongue? Should the ears be close to the face? Should the tail droop? Should the coat be soft or stiff? Should the head be the size of a bowling ball or a casaba melon?

Although Shar-Peis have been around for a while -- the breed is supposedly 2,000 years old, having originated in the south of China -- there is no one standard yet in America. In the Northeast they tend to be heavy, brush-coated dogs. In the South, a bit lighter-boned. In California, says Stirling, "they like a longer-legged dog with a lot more wrinkling on the head. They're very attuned to head wrinkles. And they do not like the brush coats."

Not yet recognized by the American Kennel Club, Shar-Peis come in a range of colors, from fawn to chocolate, five-point red to black. They average 40 to 50 pounds, standing 18 to 20 inches at the shoulder. Females are usually smaller.

Breeders complain of other breeders' unscrupulous practices, playing on the ignorance of the general public and generally selling "trash" at inflated prices.

When Neiman-Marcus contacted Dick and Zella Llewellyn last year, the owners of Shoestring Kennels in Alvin, Tex., had no idea what they were getting into.

"It created a fantastic flap," says Dick Llewellyn. "The problem was the green-eyed monster -- jealousy."

The Llewellyns were asked to contact breeders across the country to secure enough puppies to meet the demand. They sold six of their own puppies, and had more lined up until one by one the other breeders starting dropping out.

"I guess they were scared," says Zella Llewellyn.

Several breeders complained to the Chinese Shar-Pei Club of America about the promotion. They were concerned about the way the dogs were being sold, and rumors of mistreatment crackled over telephone lines. Zella Llewellyn was asked to resign her seat on the board of directors, which she did.

"We thought it was exploiting the dogs in the wrong manner," says Larry Rafferty, a Colorado breeder and president of the Chinese Shar-Pei Club of America. "We don't approve of sales through catalogues or pet shops. There are a lot of breeders who are very sensitive about who they sell to. You don't sell to just anybody that comes along."

Dog fanciers are a fickle lot. First the chow is in, then it's out. Then the akita. Last year the Rottweiler was big, and now the King Charles spaniel is getting hot. No doubt the Shar-Pei will be pronounced "out" before the general public even knew it was "in."

Sadly, some owners come to that conclusion sooner than others. Breeders talk of buyers who fall in love with a small wrinkled puppy only to watch it grow up into a nonwrinkled dog.

"Unfortunately, it is a problem," says Kandi Stirling.

The expensive pups are the ones guaranteed to keep their wrinkles. Sort of reverse aging.

Some breeders fear that the dogs are being bought more as a curiosity than a pet.

"I had several dogs abused because they were purchased as a novelty," says Linda Schatzberg. "After the initial excitement wears off, after they've shown the dog to all their friends, then the maid or butler ends up taking care of them."

Another drawback, according to Carlos Mejias, owner of the Old Town School for Dogs in Alexandria, are "major health problems. Their eyes have to be tucked. They have skin allergies and infections. Many of them suffer from malabsorption" -- the body's inability to absorb nutrients from food.

Stirling says the eyes must be tucked to prevent entropion, a condition that causes the eyelid to roll under, scratching the cornea. If left untreated, the dog could go blind. Shar-Peis also must be "socialized" -- exposed to groups of people -- early. If not, says Mejias, "they become shy and withdrawn from people. They're not as confident."

Mejias says he is seeing more and more Shar-Peis in the area, and is concerned that breeders are not warning potential buyers of the problems. "I don't think they do a good job telling people what they're in for. You're looking at $1,000 vet bills your first year. Easy."

But that won't stop Shar-Pei mania.

"I'm sure they're going to be more popular before it dies down," Mejias says. "I'm waiting for the day when they put them on a television series." CAPTION: Pictures 1 and 2, Kandi Stirling holds a Shar-Pei puppy. A 14-weeek-old Shar-Pei that may be worth as much as $3,500. Photos by Bill Snead -- The Washington Post