Trying to paginate custom post type

  <?php
            query_posts( array(
                            'post_type' => 'portfolio',
                            'posts_per_page' => 21,
                            'orderby'=> 'menu_order',
                            'paged'=>$paged
                )
            );
            ?>
   <!--BEGIN #masonry-->
  <div id="masonry-portfolio">
    <?php if (have_posts()) : while (have_posts()) : the_post(); ?>
    <!--BEGIN .hentry -->
    <div <?php post_class('quickFlip'); ?> id="post-<?php the_ID(); ?>">
      <div class="blackPanel">
        <div class="flipbg">
          <?php

                            $lightbox = get_post_meta(get_the_ID(), 'tz_portfolio_lightbox', TRUE);
                            $thumb = get_post_meta(get_the_ID(), 'tz_portfolio_thumb', TRUE);
                            $embed = get_post_meta(get_the_ID(), 'tz_portfolio_embed_code', TRUE);
                            $image  = get_post_meta(get_the_ID(), 'tz_portfolio_image', TRUE);
                            $image2 = get_post_meta(get_the_ID(), 'tz_portfolio_image2', TRUE);
                            $image3 = get_post_meta(get_the_ID(), 'tz_portfolio_image3', TRUE);
                            $image4 = get_post_meta(get_the_ID(), 'tz_portfolio_image4', TRUE);
                            $image5 = get_post_meta(get_the_ID(), 'tz_portfolio_image5', TRUE);
                            $large_image =  wp_get_attachment_image_src( get_post_thumbnail_id(get_the_ID()), 'fullsize', false, '' );

                            if($lightbox == 'no')
                                $lightbox = FALSE;
                            if($thumb == '')
                                $thumb = FALSE;
                             $large_image = $large_image[0];

                            ?>
          <div class="post-thumb clearfix">
            <?php //if($lightbox && $embed == '') : ?>

            <!--<a class="lightbox" title="<?php //the_title(); ?>" href="<?php //echo $large_image; ?>"> -->

            <a href="<?php echo get_post_meta($post->ID,'portfolio_post_url',true); ?>?iframe=true&width=100%&height=100%" class="iframe" rel="prettyPhoto"> <span class="overlay post-<?php echo $post->ID;?>" title="<?php the_title(); ?>"> <span class="icon"></span> </span>
            <?php if($thumb) : ?>
            <img src="<?php echo get_bloginfo('template_url').'/includes/timthumb.php?src='. $thumb .'&h=170&w=230&zc=1'; ?>" alt="<?php the_title(); ?>" />
            <?php else: ?>
            <?php the_post_thumbnail('portfolio-thumb'); ?>
            <?php endif; ?>
            </a>
            <?php //else: ?>

            <!--<a title="<?php //the_title(); ?>" href="<?php //the_permalink(); ?>"> -->
            <!-- <a title="<?php //the_title(); ?>" href="<?php //echo get_post_meta($post->ID,'portfolio_post_url',true); ?>" target="_blank">
                                    <?php //if($thumb) : ?>
                                        <img src="<?php //echo get_bloginfo('template_url').'/includes/timthumb.php?src='. $thumb .'&h=170&w=230&zc=1'; ?>" alt="<?php //the_title(); ?>" />
                                    <?php //else: ?>
                                    <?php //the_post_thumbnail('portfolio-thumb'); ?>
                                    <?php //endif; ?>
                                    </a>   -->
            <?php //endif; ?>
          </div>
          <div class="arrow"></div>
          <div class="entry-excerpt">
            <h2 class="title">
              <?php the_title(); ?>
            </h2>
            <?php the_excerpt(); ?>
          </div>
          <?php if(!is_singular()) : get_template_part('includes/post-meta'); endif; ?>
        </div>
      </div>
      <div class="redPanel">
        <div class="flipbg">
          <?php if(!is_singular()) : get_template_part('includes/post-notetag'); endif; ?>
        </div>
      </div>
      <!--END .hentry-->
    </div>
<?php endwhile; ?>
<div style="clear:both"></div>
        <div class="navigation">
            <div class="alignleft"><?php next_posts_link('&laquo; Older Entries') ?></div>
            <div class="alignright"><?php previous_posts_link('Newer Entries &raquo;') ?></div>
        </div>

<?php endif; ?>