Preheat oven to 325 º F
Cut bacon into pieces
In large Dutch Oven cook bacon over medium heat until slightly crisp.
Remove bacon with slotted spoon, set aside.
Pat dry beef cubes with paper towel, then sprinkle with salt and pepper.
In batches, sear beef in the bacon fat for 3 to 5 minutes, turning to brown all sides. (don’t overcrowd pan when searing beef, work in batches). Set aside with bacon.
Add carrots and pearl onions to pan cooking until lightly browned.
Add garlic and cook for an additional minute.
Add Cognac to deglaze pan, scraping all browned bits from bottom.
Put meat and bacon back into pot with the juices.
Add 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.
Using a fork combine together 2 tbsp. butter and flour then stir into the stew. Combine well.
In large skillet sauté mushrooms in 2 tbsp. butter until lightly browned then add to stew.
Return stew to oven to cook for additional 30 minutes
Season to taste with salt and pepper.