Is LBJ close to capitulation, at which point long-term buyers finally throw up their hands and sell, laying the groundwork for a long-term rally? I cannot say for sure, but I have to believe we are nearing that point, although I have definitely been wrong about LBJ in the past.
Between its market low on 3/5/03 and its market high on 5/20/08, the underlying index tracked by LBJ, the Latin America 40 Index, rose at an annualized rate of about 55%, for a total gain of just over 900% during that time period. Perhaps that was simply a bubble, but I have to believe that the underlying index is capable of rallying strongly again under the right conditions. Hopefully anemic market conditions will force the Latin American markets to create the conditions necessary for a tremendous wealth-creating rally.
I have a strategy for trading LBJ which requires me to purchase LBJ when it is dropping like this and then I will sell when it is higher. Most people don't have the stomach for this.
I don't know what you mean by "compounded tracking error." LBJ does a good job of tracking 3x the daily movements of the underlying index. It only trails an ideal 3x daily rebalanced track by a couple % points per year, which isn't too bad.