Yesterday, former Federal Reserve Chairman Alan Greenspan gave akeynote address at the KMPG 2014 Insurance Industry Conference onwhy the U.S. economy – and the rest of the world, for that matter –are in such economic doldrums. He laid out 9 reasons why our economy still stinks, six years after thefinancial crisis of 2008-2009.

There was just one problem with it, though. Everything Greenspansaid was wrong.

Well, maybe not wrong wrong. Not "2+2=5" wrong. But forall of Greenspan's reasons for being skeptical about the future ofthe U.S. economy, John Kim, Vice Chairman and Chief InvestmentOfficer from New York Life Insurance Company had a reason for whythe future of our economy looks pretty bright.

Kim very graciously acknowledged Greenspan's status andexpertise, but he also noted that when it came strictly to theworld of investments, he had an edge. And that informed a view thatoffered a counter to Greenspan's infamously gloomy outlook.

And the audience was into it, too. Kim wasn't just conjuringfaerie tales. He had the data to suggest that all the smart moneyis on the United States of America, going forward.

Here are the reasons why.

We are at a major inflection point.

Kim started off by reminding everybody that six years agoyesterday, on September 9, 2008, Lehman Brothers declined 45% to7.79 a share because a rescue deal with a Korean bank failed.Lehman's stock was down 80% year-to-date, and its latest stumblecaused the Dow to drop 280 points. 10-year Treasuries were tradingat 3.62% and two-years were at 2.23%, numbers considered sky-high,now.

In the months that followed – the Lehman bankruptcy, AIG, FannieMae, Freddie Mac, Bank of America buying Merrill Lynch, JP Morganbuying Washington Mutual, Wells Fargo buying Wachovia…it was whatKim described as a "never-ending spiral of despair that resulted inthe cavalry of central bank interventions, led by the FederalReserve." From that, we saw TARP, the AIG, Freddie and Fanniebailouts, and QE1, QE2 and QE3. From all that, Kim said, we are nowa major inflection point.

The first major sign of recovery, Kim said, is improvingemployment. Jobs are slowly trending back and have nearly returnedto where they were pre-crisis. Unemployment rose to 10.2% in 2009,and in 2014, it's declined to 6.1%. Yes, Kim admitted, the qualityof these jobs is not that great in many cases. Yes, participatingrates are the lowest in two generations. "I get all that," Kimsaid, smiling. "But I suggest that from November 2009 to today,there has been a dramatic recovery in our labor picture. Europe andJapan would salivate for these improvements."

He's right. They would.

We are coming off an unbelievably good marketrally.

Kim pointed out what he called "an absolutely historicperformance in our risk asset classes," as a way to underscore whathas been, since the crisis, one of the most remarkable marketrallies in history.

How good has it been? On April 1, 2009, the S&P 500 indexvalue was 811. The BAML High Yield Spread was 1,712. By September5, 2014, the S&P 500 had risen to 2,007. The BAML High YieldSpread had dropped to 393. If you had invested in both, the S&Pwould have given you a return of 182%. The BAML High Yield wouldhave given you a total return of 136%. And yet, over this period oftime, the average ownership of stocks declined from 65% in 2007 to52% in 2013. This has been one of the biggest bull markets inrecent history, and it seems like a whole lot of people missedit.

That's a shame, since this 5.5-year period has performed betterthan any period in history for these two classes, which are themost volatile you can get your hands on. That is the kind of rallywe've been experiencing. That is a good thing.

Now, will the market correct meaningfully, or will it stay atthese levels? Like all data, Kim said, "if you torture the datalong enough, it'll confess to anything." But he noted that based onthe "Rule of 20″ wand where the 10-year Treasury is today, the P/Emultiple is currently below historical levels, which suggests thatif the 10-year stays at 2.5%-3%, then the market has room toincrease. Chances are, those rates will go up, though, but not foranother few years. We're getting close to a full valuation for theequity markets, Kim pointed out, but we're not there yet.

Translation: don't expect a correction any time soon. The rallywill continue.

Low interest rates are a good thing. Wait,what?

That the rate on the 10-year will stay down for the next fewyears is somehow a good thing for equities is yet more bad news forthose who invest in bonds, like insurers. The bad news is that wecan expect interest rates to stay lower for longer, Kim said. "Ithas been a very painful two and a half years for us, interestrates-wise." In July 2012, the 10-Year Treasury Yield hit 1.39%,prompting many to fear if the U.S. was about to hit a Japanscenario, but rates have since risen to 3.05% and then dipped backdown to 2.46%. They might rise some more – which Greenspansuggested, but Kim remained skeptical. He sees rates staying lowerfor longer. But this isn't necessarily a recipe for doom.

Keep in mind that the global economy is stalling, and stallinghard while the U.S. is, comparatively, growing nicely. We canexpect around 4% GDP growth for the remainder of the year, whilethe latest IMF forecast for the world cut global GDP growth from3.7 to 3.4. Ouch.

With that as a background, global yield arbitrage all plays toour favor. If you are a German investor, Kim said, and you arecomparing a 2.5% yield on a U.S. 10-year versus 1.0% on A Germanone, or a 2.2% return on a Spanish one, then putting your money inthe U.S. Treasury market becomes a no-brainer.

China, Japan and OPEC, for example,are all doubling down on U.S.Treasury bonds, Kim said. They now hold more than $2.7 trillion inU.S. Treasuries. Why? Because despite everything, the U.S. marketis still the "deepest, most liquid place to hold cash," Kim said.At present, some 35% of our total treasury debt load is held byforeigners, which is up from 31% from 2011. The Chinese governmentis increasing its purchase of U.S. Treasuries at the fastest paceon record since it began buying our Treasuries 30 years ago. WhenChina, Japan and OPEC are all placing their long-term bets onAmerica's future, that's a good sign.

Hardship breeds strength.

The "still low environment," as Kim put it, is also a good thingbecause it is, quite simply, forcing insurers to get better attheir business. Unable to rely on yield from their investments,insurers have no choice but to turn to operations for profit.Insurers are now forced to consider product changes, revisit theirpremiums and fee schedules, monitor growth in markets (and considerwhether it is time to exit them), and other features. This is akind of evolutionary pressure not entirely unlike what insurersunderwent during the prolonged soft market of the 1990s, andultimately, it makes for a harder, faster, better and strongerinsurance industry.

Companies are having to take a sharper look at risk managementon their investment side. They must embrace enterprise riskmanagement and engage in tighter interest rate and cash flowhedging. Kim cited an NAIC figure that of the total swaps on thebooks for insurers, some 75% of that swap activity is noted forinterest rate hedging purposes. This is a very positive sign, Kimsaid.

Operating efficiency is also improving across the industry ascompanies are embracing transformations of their operating models.This is happening more at public companies (driven by shareholderexpectations) rather than mutuals, Kim said, but everyone isthinking about how to streamline their operations and manage theirunit cost structures. The three elements of operational modelchanges to keep an eye on are process & technology (can theday-to-day operations be made more efficient through technology?),work structure (can the company delayer its own hierarchy?) andorganizational effectiveness (should the company revisit itsinternal roles, responsibilities, governance and talent?)

These are all worthy issues to face head-on. Ideally, everyinsurer should do this all the time, but we all know that whentimes are fat and insurers can get by on their investments,complacency can set in. That might work during peacetime, but nowit's war, and it's time to get lean and mean. Your competitors arealready doing it, and when you do too, Kim implied, you'll be abetter company for it. This is all a good thing.

Alternative investments have earned a place at thetable.

With interest rates so low, many insurers are embracingalternative investments. "It's clear that we're pushing theenvelope in terms of adding yield, whether we're going intohigher-yield bonds, or CMBS, emerging market, debt, or commercialmortgage loans," Kim said. Some insurers have already gotten intothis space faster, but the entire industry needs to move toalternatives if they want their investment side to come back tolife.

And indeed, it seems like more have than haven't. "The entireuniverse of investors have gone alternative," Kim said, noting thatsince 2005, traditional investment assets have grown at a compoundannual growth rate of 5.4%. Alternatives, on the other hand, havegrown at an annual rate of 10.7%.

Private debt, private equity funds of funds, private equitysingle funds, REITs, infrastructure, mezzanine debt, hedge fund offunds, commodities, hedge funds (single manager) are all expectedto increase.

"This is powerful, but very dangerous," Kim warned. "If you donot have the capabilities to analyze this, you could do verypoorly." He noted that New York Life, given its size andsophistication, does as good a job with alternative investments asanybody, but they don't engage in a lot of common alternatives,such as single-manager hedge funds, because it considers them toorisky.

That said, alternatives are here to stay, and they provideinsurers with a strong avenue for yield, provided that they areengaged with a sober approach and a firm sense of risk management.Now is not the time to take a Wild West approach to alternatives.In fact, it's probably never the time to take a Wild West approachto alternatives.

The U.S. middle class remains a largely untappedopportunity, especially for insurers.

Since the global financial crisis, Kim said, the recovery hasreally only been beneficial for the wealthy. From 2009-2011, forexample, the average net worth per household for the top 7% of allhouseholds increased by 28%, from $2.5 million to $3.2 million.Conversely, the change in average net worth for the bottom 93%decreased 4%, from $139,896 to $133,817. Kim was prettystraightforward about it: "This has been one mother of a gift" thatthe central banks bestowed upon the world's wealthy, and the socialimpact of this, in the long-term, will be profound. But, Kimstresses, from a financial and economic perspective, this might notbe the worst thing in the world.

If you don't look at it in terms of 7% vs 93%, but instead lookat distribution of wealth in quintiles, there are lot of insurancesales opportunities in the 2nd and 3rd quintiles, which make up themiddle class and upper middle class, respectively. The top quintileis already well served by banks, wealth advisors, mutual fundindustry, and the like. And the industry should continue to servethat market, Kim said. But what New York Life likes are those 2ndand 3rd quintiles. There are a lot of Boomers in those who areturning 65 at a rate of 10,000 a day, and who will retire at thatrate for the next 20 years. This is a retirement tsunami, Kim said,and these people are desperately shifting to treasuries, bonds andvarious forms of annuity products and other conservative investmentproducts that insurers do a better job of constructing and offeringthan anyone else.

So the wealth gap means more opportunity for selling to themiddle class. Don't give up on them.

There global middle class is exploding, and the U.S. isthere to sell to it.

The opportunity of selling to the middle class is especiallytrue if you look outside of the United States, Eurozone and Japan."In many respects, the core fabric of our middle class going awayis offset by the global growth of the middle class in China, India,Malaysia, and Korea," Kim said. "In Asia, these people are goingfrom the novelty of three meals a day to buying designer bags forthe wealthy." There is a once-in-a-lifetime growth in the middleclass around the world, driven by a shift in the share of worldGDP. By 2018, 54% of the world's GDP will come from the so-called"developing economies."

Concurrently, the world's population is increasingly urban.There are already more people living in cities than in rural areasacross the world, and by 2050, some two-thirds of the world'spopulation, buoyed by a huge middle class, will be concentrated incities. This is a huge set-up for insurers in general and U.S.insurers in particular, which are uniquely well suited for servingboth middle-class clients and urban clients. In fact, this might bea market development "perfect storm" the likes of which the moderninsurance industry has never seen before.

Foreign oil? What foreign oil?

Getting back to points of strength on the U.S. economy, Kimspoke on the narrowing gap between U.S. energy consumption andproduction. Citing information from BP – "not the most crediblesource these days," Kim joked, in reference to BP's recent rulingof gross negligence in the Gulf oil spill – increasing domesticproduction could make the U.S. energy independent by 2030. But toback that up, Kim cited more conservative numbers from the EnergyInformation Administration that also suggested the gap betweenconsumption and production would get very narrow by 2030.

Compare this to 2005, Kim said, when we imported 30% of ourenergy consumed on a daily basis. That is a huge improvement,especially in Texas.

Case in point: some 20% of new construction in the largestcentral business districts in this country is currently happeningin Houston alone. Now, Texas has seen more than its share of boomand bust cycles, Kim noted, but in our chase for energy, Texas ishaving a boom that extends well beyond oil and gas. Other largeeconomies in the region are benefitting as well. Most folks with an"East Coast mentality" don't appreciate that, Kim said, but it's abig deal, and its a big reason why the indicators in the U.S. arepointing up.

The U.S. has a huge new natural resource: BigData.

200+ million hours of video uploaded to YouTube each day. 81billion "likes" on Facebook last month. nearly 5,000 text messagesper month…from the average teenager. 15 billion tweets last month.The advent of "SoLoMo" – Social, Local Mobile. We are awash indata, and all of that data is coming from us – info or content thatsome 3 billion human users are volunteering.

But this is all just the beginning. There is an informationsupernova just getting underway as the Internet of Things – anincreasingly vast array of personal items and technology that exchange and upload information on those who use it, such asGPS info, purchasing info, medical info – gets established. At thesame time Kim gave his address, Tim Cook and his colleagues atApple were unveiling the Apple Watch, Apple's first wearablecomputing device. Given Apple's ability to change behaviors in wayswe never thought possible, Kim said, the watch could be agame-changer like the iPad, and deliver a new magnitude ofergonomic and health diagnostic information. "Remember September 9,2014 not for what John Kim said, but for what Tim Cook said," Kimnoted.

We are at a point where we can quantify the positive impact ofBig Data, Kim said, noting that as we realize some $300-$600billion in annual cost savings and productivity gains from BigData, the U.S. economy is building fresh GDP equivalent to about+1.5 to +3%…all from Big Data. The Economist noted that data is newbig natural resource, analogous to what steam was in the 18thcentury, what electricity was in the 19th century and whathydrocarbons were in the 20th century.

And the U.S. is driving it.

The big postscript to this is that not everybody is making themost of it just yet. Insurers are well behind the curve when itcomes to implementing a digital strategy. In a world where thereare currently five exobytes of information on the internet (Googlean exobyte to see how big it is), some 30% of insurance companiesare doing nothing with it. Another 43% are trying to understand it.That means that three-quarters of the insurance industry are tryingto figure out what to do with Big Data.

The truth is, few in the insurance industry have really used BigData to their advantage – whether it's because of constrained ITbudgets or simply a lack of focus or understanding. Maybe 7% ofinsurers have a well understood digital strategy. Maybe 3% havefully integrated a digital strategy into daily operations. But theupside here is that when it comes to Big Data, Kim said, because sofew insurers have harnessed data to their competitive advantage ina meaningful way, especially in life insurance, the only way to gois up.

"It's like playing hockey in Costa Rica," Kim said. "We're allpretty good, considering the standards."