Ferrofluids are one of the coolest things i know of, but in case you dont know what they are:
Ferrofluids are made up of tiny magnetic fragments of iron suspended in oil (often kerosene) with a surfactant to prevent clumping (usually oleic acid). The fluid is relatively easy to make at home yet extremely expensive to buy on-line ($165 a liter!)*
There are many commercial applications for ferrofluids--speakers and hard drives being the most common. The oily fluid prevents debris from entering hard drives when a small amount is placed between the magnets and shaft. In the case of speakers ferrofluids remove heat from the voice coils and help dampen the cone movement.
Using a magnetic ink developer (MICR) seems to be the easiest way to make a smooth ferrofluid at home.
All you have to do is simply purchase a bag of developer ($20) and add some veggie oil. Using a lower viscosity oil like kerosene or biodiesel along with a surfactant (citric acid, oleic acid, etc.) may improve the quality further.
*info from popsci.com
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