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This letter was sent to Stanley Unwin of Allen and Unwin regarding Tolkien's next project after The Hobbit. He had previously discussed The Father Christmas Letters with Unwin and passed him manuscript of the Quenta Silmarillion and The Gest of Beren and Lúthien. The latter two works had been returned with commentary from one of Allen & Unwin's readers, Edward Crankshaw – he praised certain aspects of the Silmarillion but criticized its "eye-splitting Celtic names", and dismissed the poem altogether. Despite this decidedly mixed review Tolkien was pleased the Silmarillion was not rejected out of hand, hoping that he might one day publish his "private and beloved nonsense". He was less pleased with the "Celtic" comparison, defending his invented names as "coherent and consistent and made upon two related linguistic formulae, so that they achieve a reality not fully achieved to my feeling by other name-inventors". More generally Tolkien rejected the notion that his mythology was in any way 'Celtic':
- "I do know Celtic things (many in their original languages Irish and Welsh), and feel for them a certain distaste: largely for their fundamental unreason. They have a bright colour, but are like a broken stained glass window reassembled without design. They are in fact 'mad' as your reader says – but I don't believe I am."
However Tolkien recognised that The Silmarillion in its current form was not publishable and that "a sequel or successor to The Hobbit was called for". He promised to work on this, though explained that he was finding it difficult to conceive of more stories featuring hobbits because "the real fun about orcs and dragons ... was before their time". In answer to this problem he offered two ideas in which we can detect germs of The Lord of the Rings: a new but "similar" conflict to the First Age's orcs and dragons, where comical hobbits would be set against "things more elemental"; and an 'enlarged portrait' of Tom Bombadil, "spirit of the (vanishing) Oxford and Berkshire countryside".
At the end of the letter Tolkien asked several questions about illustrations for the reprint of The Hobbit, requested four copies to use as Christmas presents, gave Unwin his regards and suggested including a runic alphabet in the next edition – apologising for the "scrawling and rambling nature" of the letter in a postscript on the grounds of illness.