Another Way to Evaluate Stocks - Voodoo. Arthur Laffer, an economist, has found a new way to evaluate stocks that may seem to be unconventional, compared to the standard P/E method, however, he uses data that is credible, which makes this approach one to consider, as one evaluates a stock. This new Voodoo approach can be considered strategic or completely unconventional - you decide.

The economist instead uses the Commerce Department's National Income & Product Accounts, a compilation of profits shown on tax returns of some 5 million public and private companies.

Laffer makes connections between the NIPA figures and fluctuating interest rates, personal tax rates and other factors. These variables inherently affect stock valuations, he says, and need to be cleansed in historic comparisons. "When interest rates are 22%," he explains, "you would expect a different P/E from an equity than when interest rates are 3.5%." Upshot: Laffer says his NIPA system would have sent a sell signal in 1999 but now indicates stocks are the cheapest they've been in three decades. That doesn't particularly help in picking individual stocks, because NIPA draws only general conclusions.