I'm bullish about the future. I'm bullish about America. I'm even more bullish about HVAC. Sounds crazy, right? How can anyone be optimistic in the face of the persistent onslaught of negative news? How can anyone be optimistic about business, given the country's rush to socialism? Isn't today more like 1933, than 1983?

Nonsense! Things seem worse than reality because our pessimist-in-chief has used the bully pulpit to manufacture malaise so he can foist an otherwise unacceptable agenda on a panicked public. An anti-free market mainstream media has been all too willing to pile on, resulting in the drumbeat of depression. In this environment, even good news is reported as bad.

When Hershey's sales and profits increased, media reports proclaimed this as a sure sign people were depressed and eating more chocolate. Most reports neglected to mention or assign any credit to the company's increase in advertising or cost cutting measures.

When March car sales shot up 24.5%, the headline in USA Today proclaimed “Car sales not as horrid in March.” Buried in the copy, Autodata noted that the jump was “the biggest February-to-March gain in at least seven years.”

Ours is a headline-driven world where superficial, slanted stories pass for news. There is plenty of good news behind the gloomy headlines if you look for it. Fail to look beyond the headlines and you will fail to find the truth.

Here's the truth. The steep first quarter downturn following the financial panic is already leveling off. The economy will soon start to recover, regardless and in spite of any actions by Washington. Business has long responded to change more rapidly than government. In the Internet age, business is even faster.

This is NOT a depression. This is not the 1930s when the Fed choked off economic activity with excessively tight money, when investment was punished and America's entrepreneurial spirit was stifled by an increase in top marginal tax rates from 25% to 79%, and when the Smoot-Hawley Tariff Act crippled world trade.

Today the Fed is printing money left and right, making inflation a bigger concern than depression. While tax rates will increase, they will hardly reach Roosevelt's punitive levels. And other than a few radicals seeking a carbon tax on imports from coal burning economies, no one is proposing restrictions on trade.

So forget about a depression. And forget about government solutions. Government spending won't help the recovery. It won't even kick in until after the recovery begins. The government's not going to make things better. You and I will make things better.

American entrepreneurs and small business owners are incredibly resilient and creative. We will adapt and change. We will flow around, over, and past any obstacles in our way.

In recent years, HVAC contractors have become especially adept at overcoming obstacles. The replacement market is driven by air conditioning shipments from 15 years ago. In 1990, industry shipments dropped 15% and stayed flat for four years, reducing replacement demand 15 years later, from 2005 to 2008. Piling on was the reduction in system affordability from the 13 SEER mandate, the new construction crash, and the recession.

Those obstacles will soon be in the rearview mirror. Fifteen years ago, in 1994, air conditioning shipments jumped 20%. While an anxious public may try to put off replacements until the economy improves, 20% more people are likely to face repair or replace decisions this summer than a year ago.

Unless people suddenly decide to live without air conditioning, replacements should grow at a compound rate of 11% per year for the next five years, because that's what shipments did 15 years ago. Other helpful factors:

  • The 5 mm and 7 mm coil innovations will improve system affordability.
  • The new construction market will bottom out and turn.
  • The economy will resume growth. Driven by entrepreneurs.

Wow! What a great time to be an HVAC contractor!

Matt Michel is CEO of the Service Roundtable, which has not accepted any TARP money. Matt can be reached at 214/995-8889 or by email at matt.michel@serviceroundtable.com. More reasons to be optimistic about the future can be found at www.ServiceRoundtable.com. Membership is only $50 a month and includes unlimited access to millions of dollars of contractor sales, business, and management tools.

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