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Santa Claus lives in the Laughing Valley, where stands the big, rambling castle in which his toys are manufactured. His workmen, selected from the ryls, knooks, pixies and fairies, live with him, and every one is as busy as can be from one year's end to another. On one side is the mighty Forest of Burzee. At the other side stands the huge mountain that contains the Caves of the Daemons. And between them the Valley lies smiling and peaceful. One would think that our good old Santa Claus, who devotes his days to making children happy, would have no enemies on all the earth; and, as a matter of fact, for a long period of time he encountered nothing but love wherever he might go. But the Daemons who live in the mountain caves grew to hate Santa Claus very much, and all for the simple reason that he made children happy. One Christmas Eve, they decided to take action!