Instructables user [killbox] seems to have come across a process that actually makes magnetic silly putty “better”, depending on your specific needs. He had tons of fun making a batch of magnetic putty, but thought that the addition of iron oxide made it stiff and a bit slow moving for his tastes.
He tried to find a household item that could act as silly putty thinner, but after trying various oils, gylcerin, and rubbing alcohol, he came up empty handed. Undeterred, he researched how silly putty itself is made, and based on its list of ingredients, decided to seek out some sort of silcone-based lubricant.
He headed out to the local sex shop, and spent some time browsing through the “personal lubricant” section, in hopes of finding what he needed. He settled on ”Gun Oil”, a silicone lubricant that also contained Dimethicone, an item on the ingredient list of the lubricant he initially used to make the batch of magnetic putty.