If you ignore their recent volatility, the financial markets are painting a fairly happy picture. The S&P 500, for instance, is closer to its 12-month high than its low, and investment grade bonds are behaving like next year should pretty much like this one.

But under the surface — which is where big trends are born — the scene is chaotic, with brutally-disappointing earnings reports and company-specific scandals combining to burn some legendary investors:

Bill Ackman’s hedge fund could be losing over $1 billion on Valeant this week

(MarketWatch) – Valeant Pharmaceuticals International Inc.’s stock tumbled 23% on heavy volume in midday trade Wednesday, after a bearish report from a noted short-seller regarding questionable business practices made the rounds. The drug company’s stock has now plunged $64.36, or 36% this week, after the company said early Monday that it was mulling a change in strategy, including a possible spinoff of assets, as it faces government scrutiny over its pricing and distribution practices.

If billionaire investor Bill Ackman’s hedge fund, Pershing Square Capital Management, still holds the 19.47 million shares the latest regulatory filings said it owned as of June 30, it would be losing $1.25 billion on its Valeant investment this week, and $2.12 billion since June 30. Pershing, which is Valeant’s third largest shareholder, declined to comment. The largest shareholder, Ruane, Cunniff & Goldfarb Inc., owns 33.88 million Valeant shares, and could be losing $2.18 billion this week, according to FactSet; T. Rowe Price Associates, the second-largest shareholder with 20.46 million shares, could be losing $1.32 billion this week.

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Billionaire David Einhorn’s Hedge Fund Is Down 16.9% In 2015

(Forbes) – The hedge fund of billionaire David Einhorn continued to plunge in September, falling 3.5%, further denting his returns in 2015. Einhorn’s Greenlight Capital hedge fund is now down by 16.9% for the year, an ugly looking number for the noted stock picker and short seller.

Einhorn’s returns, which were posted to the web site of his reinsurance company, are among the worst of any major hedge fund run by a billionaire this year. He came into September struggling and things got worst.

At 46, Einhorn has built a great reputation by making shrewd calls, like when he shorted Lehman Brothers into bankruptcy. But in 2015 his returns have been hurt by his hedge fund’s exposure to stocks like SunEdison, the solar and wind energy producer that was recently Greenlight’s second-biggest position. SunEdison’s stock is down by more than 60% this year; it fell by more than 30% in September alone. Investors this year have taken a dim view of SunEdison’s recent and expensive acquisition spree.

Another major holding that has stung Einhorn in 2015 is Greenlight’s big position in Micron Technology the semiconductor company. Early in the summer, Einhorn told his investors that he believed Micron’s stock would be worth more than Netflix’s stock in the next few years. But in the near term, Micron’s stock was down by nearly 9% in September. The company will report fourth-quarter earnings on Thursday after the market closes and investors will be looking for any positive signs after the chip maker reported terrible looking earnings in the third quarter.

Einhorn’s large position in Consol Energy has also continued to cause him pain this year. The coal and natural gas company saw its shares fall by 36% in September.

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Warren Buffett is having a really bad week

(Fortune) – Warren Buffett likely had a worse week in the market than you did.

It started off with Walmart. Last week, at a meeting with analysts, the company predicted that sales would be flat this year and that earnings would likely drop this year and next. Walmart’s stock fell 10%, or $6.07. Buffett’s Berkshire Hathaway holds roughly 60.4 million shares of Walmart, so that was a $360 million hit to the conglomerate’s investment portfolio.

That same day, Wells Fargo reported earnings that were up a mere 1%. Banks are supposed to do well when the economy is doing well. Its shares dropped a modest $0.36. But to Buffett’s Berkshire, which holds 40 million shares of Wells Fargo, amounting to a $24 billion stake, that small drop meant another $170 million shaved off the Oracle of Omaha’s portfolio.

Then came IBM, which Buffett has bet heavily on over the past few years. On Monday afternoon, the tech giant reported third quarter earnings that were 14% below the same quarter’s results last year. IBM’s shares fell 6%, or $8.58. The resulted in a $680 million hit to Buffett’s Berkshire, which owns nearly 79.5 million shares of IBM, a stake now worth just over $11 billion.

Three stocks, one week, $1.2 billion down the drain.

Taken together as a group, Buffett’s five largest investments come across as struggling giants with business issues that don’t seem to be going away soon, the kind that will be very hard for the companies to fix. Coke needs to make a massive shift away from sugary drinks. Walmart still lags in e-commerce at a time when retail is shifting online. And American Express, which has lived off corporate expense plans, is struggling as companies cut back costs. The end of its Costco deal will stymie efforts to reach new customers.