James Bartholomew writes an investing column for the Daily Telegraph in which he tells readers what he's buying when and at what price. Two weeks ago he bought shares in Paragon, a British mortgage company that specializes in lending to landlords. He was lured by the price charts, which showed Paragon stock falling by half from its highs; the P/E ratio, which showed Paragon selling for only 4.5 times projected earnings; and the dividend, paying 9 percent at those depressed prices. He bought. He immediately lost.

Then came Tuesday this week; the day of the results. I turned on the computer and found the list of my shares. There, looking back at me was the price of Paragon and next to it "minus 51 per cent ".

It is not often that one buys a share and sees it fall by more than half within a week. I can tell you it is a rather numbing experience. The company statement made it clear that banks were not exactly falling over themselves to keep the money flowing towards Paragon despite its superb record of minimal bad debts among the landlords it lends to. The banks were nervous.

As a result, Paragon may be forced to have a rights issue. I have to admit that this incident has been a bit of downer. It has also challenged my previous view of the market.

Only two weeks ago I wrote here in optimistic, even complacent mode. Now I am wondering just how bad are things going to get. First Northern Rock. Then reliable information that a former director of a well-known bank has sold every share he had in that bank. Now Paragon has problems raising funds at a reasonable rate.

Know the feeling? Legg Mason's Bill Miller does. He bought Countrywide Financial in 2006, when it was in the 30s, down from a high of $45. He bought more in 2007, when it was still in the 30s. He bought more this fall, when it was in the high teens. Now you can buy Countrywide for $10. I have no doubt that people who invest in Miller's Legg Mason Value Trust now will do quite well if they hold on for five years. But the ride for them, and everybody else in the market, is going to be rough. The risk isn't just that some mortgage loans aren't going to get paid back. The risk, as Bartholomew's column shows, is leverage, liquidity and solvency. Your mortgage portfolio can be as solid as a castle but if you rely on third-party financing (who doesn't?), the value of your assets has plunged (whose hasn't?) and you can't get credit (or even worse, if you've got a note coming due), you've got problems.