Preheat oven to 325 º F
Cut bacon into pieces
Using a large Dutch Oven cook the bacon over medium heat until slightly crisp.
Remove the bacon with a slotted spoon, set aside.
Pat dry beef cubes with paper towel, then generously sprinkle with salt and pepper.
Working in batches, sear the beef in the bacon fat for 3 to 5 minutes, turning to brown all sides. (don’t overcrowd pan when searing beef or it will steam instead of sear. Set aside with bacon.
Add the carrots and pearl onions to the pan, cook until lightly browned.
Add the garlic and cook for an additional minute.
Add the Cognac to deglaze pan, scraping all browned bits from the bottom.
Place the meat and bacon (with all the juice) back into pot.
Stir in the red wine and beef broth. Add more if needed to ensure meat is covered.
Stir in tomato paste, thyme and bay leaf.
Bring to a simmer. Cover pot with lid and place in oven for 1½ hours or until the meat and vegetables are very tender.
Remove stew from oven and place on stove top.
In a small bowl whisk together 2 tablespoon of butter and 3 tablespoon of flour. Stir into the stew, combining well.
In large skillet sauté mushrooms in 2 tablespoons of butter. Saute until lightly browned. Add to the stew.
Place stew back into the oven and cook for additional 30 minutes.
Season to taste with salt and pepper.