Forget bulls and bears, today's market action is all about the monster, a red one named Elmo.

Before you click out of my post in disgust, here me out. Elmo viewers, like my 19-month-old son, learn that anything is possible provided that you have a good imagination and some simple art supplies. Another word for this is self-fulling prophecy.

When it comes to investing, sentiment comes in waves. When times are good, Wall Street analysts trip over themselves to come up with superlatives to describe the wonderfulness of the market. They then kick the market as it goes down and stays down. Then all of the sudden, pundits start arguing that things are not as bad as they seem, a phase that we are in today.

"Analysts say the stock market has been struggling in recent days to adjust its economic outlook, with some experts increasingly optimistic that the U.S. can avoid an outright recession," The Wall Street Journal says. "On the other hand, many remain nervous that the economy will suffer a prolonged bout of weak growth that might feel to many Americans like a recession even if it doesn't fit the technical definition of one."

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.

My son is an Elmo addict. He has Elmo clothes, Elmo books, and Elmo toys. He insists on listening to an Elmo CD whenever he rides in my car and watches the furry Muppet almost every day on "Sesame Street." Oh yeah, he calls his binky Elmo.

And you know what? This doesn't bother me.

Sesame Street, which has been on the air for about 40 years, is still a quality show. It teaches kids the alphabet, how to count and other important lessons in an entertaining manner. The show has some aspects of Saturday Night Live to it with clever bits like having Oscar the Grouch host something called the "Grouch News Network," which featured CNN's Anderson Cooper.

I realize that his Elmo fascination won't last. My son recently discovered Mickey Mouse on one of Walt Disney Co.'s (NYSE: DIS) cable channels. Eventually, Mickey will give way to Dora the Explorer and SpongeBob SquarePants on Viacom Inc.'s (NYSE: VIA) Nickelodeon.

I took a quick cruise through the eBay discussion boards just to get a feel for how Elmo is doing in the public opinion polls. It would seem that Elmo and the PS3 gaming console are less than the ultimate in popularity right now. The trouble centers not around the items themselves, but there's some negative sentiment regarding the alleged phantom shortages that we've been reading about.

The discussions center around two schools of thought. On the one hand we have the hard core capitalists (of which I am one), who say it's a market driven economy and holding back merchandise to create supply side value is a valid marketing concept and there's nothing evil about it. On the other hand we hear the social responsibility group whimpering that those wicked old merchandisers should release all available product to immediately bottom out prices.

Which group do you align yourself with? Are you one of the people who think controlling supply to enhance demand is an honest business practice? Or are you one of the people who think product should flow as soon as it is actually available? Remember that we're not discussing food items or heating fuel. These are toys which anyone can do without.

Give me your opinion. I promise that I'll tell someone about it!

It was what thousands of parents of whiny kids were waiting for. Out of the blue, the Tickle-Me-Elmo floodgates are open and (among others) Wal-Mart Stores, Inc. (NYSE:WMT) makes oodles of TMX Elmo dolls available on the company's web site. From an, umm, "hidden cache." According to Heather, a TMX Elmo searcher in my office, she finally discovered an Elmo available "suddenly" from Fisher Price. Another warehouse abruptly appear out of the fog in El Segundo? (Do they have fog in El Segundo?)


All at once, eBay, Inc. (NASDAQ:EBAY) listings are everywhere, 22,446 results for my search for "TMX Elmo" and not just lots of results but falling prices. When I first checked around 10:45 a.m. there were dozens of listings closing around $5 or $10 over the suggested retail price of $39.99. 20 minutes later, when I was finishing up this piece? It was more like $5 or $10 under the suggested retail price. The Spanish version was going for a ridiculously cheap $26.55. Market floodage has commenced.

When Black Friday was approaching and customers were gearing up for their long wait in line to be one of the few, the proud, the early purchasers of TMX Elmo dolls, a few less festive souls whispered of "artificial shortages" and wondered if Mattel was purposely creating a frenzy over the toys. Most parents and eBay sellers accused them of a distinct lack of holiday spirit, and oh yeah, not enough capitalism.

On the 10th anniversary of it's fabled 1996 launch and subsequent rise to notoriety as the most sought after toy for 1996, at least 100 Tickle-Me Elmos have gone missing. More specifically 100+ T.M.X. Elmos (10th anniversary edition) went missing on Oct. 31 while en route to a Wal-Mart Stores, Inc. (NYSE:WMT) location in Betonville, Ark.

While the 100+ missing Elmos won't adversely affect Wal-Mart's bottom line, its the consumer sentiment that Wal-Mart is concerned with.

As the holiday season nears, shoppers begin to exhibit zealousness in obtaining the "fad" toys for the year. If Wal-Mart is seen to be lacking the "hot" toys for the year, it could easily find its customers scouring the shelves of competitors like Target Corp. (NYSE:TGT).

The T.M.X. Elmo is on industry benchmark Toy Wishes annual "Hot Dozen" and already making headlines with tales of armed muggings for the doll.

While Wal-Mart has offered a "reward," no specific amount has been announced yet. Though if 1996 was any gauge and demand outstrips supply again, market value per doll could easily break the $1000 mark.

Though they cater to a different market segment, the other major items to watch for this holiday season are the Wii from Nintendo and the PS3 from Sony which have already garnered enough attention for eBay, Inc. (NASDAQ:EBAY) to post a special set of rules regarding auctioning these items.

[Photo via Fischer-Price]

Just when I thought some parents couldn't act any loonier, the venerable Tickle-Me-Elmo doll has made a strong comeback in popularity, as Mattel, Inc. (NYSE:MAT) designed TMX Elmo (that's Tickle Me Extreme) for the 2006 holiday selling season. Many of you may remember the Cabbage Patch Doll craze of the 1980s, and I remember watching newspaper ads go up left and right for those dolls, asking thousands of dollars.

Parents would rush out to buy all they could, with the intention of re-selling the dolls for a profit. Times have not changed at all -- just the medium. EBay has now replaced the local classified ads and other physical mediums to ensure top dollar is made for goods that are high in demand -- but low in the supply side.

The holiday season each year is a study in standard economics, with hot sellers, especially those with surprise popularity, demonstrating the supply and demand pricing theories that have been found in economics textbooks for over a century of not much, much longer.

The TMX Elmo doll, whose predecessor was a holiday gift sensation just a decade ago, is back with its eXtreme 10th-anniversary edition. And unsurprisingly, eBay to explode a little with the new dolls going for $5,000 and more. I wonder if there will be an "11th anniversary" edition. Heh.